What is SIP or Systematic Investment Plan?

SIP or also known as Systematic Investment Plan is a mode through which one can invest in mutual funds and that too systematically and regularly. Furthermore, investing in SIPs proves to be a prudent approach, especially when you are addressing towards long-term financial goals.

Though have you ever heard of Recurring Deposit or RD? Both, Recurring Deposit and Systematic Investment Plan are almost the same but, there is a thin line that differentiates both.

Recurring Deposit is also a kind of investment wherein you invest a certain amount of money in your recurring deposit account whereas in Mutual Funds the money invested is deployed in a mutual fund scheme and not in a bank deposit and thus, it is said that mutual funds are subject to market risk.

Investing in SIP reminds us of our childhood days. Remember, how we used to put some money from our pocket money in a piggy bank? Let’s look at the working of SIPs.

The entire working of SIP is based on a simple principle which is to invest regularly. Investing regularly further allows you to build wealth over the long-term. In SIPs, a fixed amount as coveted by you is debited from your bank account on a specified date (which can be on a daily, monthly or quarterly basis) and then further invested in the scheme that is selected by you and that too for a specific tenure. The tenure can be for months and even years. Now, you will be wondering how the amount is debited? The amount that is debited is through post-dated cheques or through an ECS mandate.

Picking the Best SIP Investment Plans for the Year 2018 - 2019:

SIP or Systematic Investment Plan not just helps to build wealth, but also provides financial discipline in the lives of all the investors. In order, to avail benefits of SIP investments, one has to select the best SIP plan first.

There are certain steps that ensure the long-term commitment that you are making today will help you in achieving your goals tomorrow. Understanding the importance of choosing the best SIP investments plan, here enlisted are some aspects you can consider to help you to do the same. Here’s how one can choose the best SIP investments plan. Also, you can get the right recommendations from the industry experts.

Evaluate the Category:

The mutual funds are accessible in three important categories that include debt, equity, and hybrid funds. The prudent investor will invest in the funds that he or she understands well in the terms of benefits and drawbacks. A person who has very good knowledge about the equity market with high and moderate risk appetite will invest in the small-cap fund. While a person who is quite naive in this field will go for the large caps and balanced funds. Suppose you exactly know where you want to invest, selecting the suitable SIP investments scheme becomes very less tedious.

Risks Associated:

Risks linked to any scheme needs to be checked. You need to learn about your fund’s volatility if the market is down and amount of losses that you will experience. All three factors to look include Sharpe Ratio, Standard Deviation, and Maximum Drawdown. Let us consider same in the different products of an equity category.

Portfolio Management:

Keeping the right track of your portfolio when you are investing in SIP investments funds is as vital as selecting the fund. The quick overview of this portfolio will go a very long way of enhancing your investment returns. So, you need to learn about your portfolio's investment style & top scheme holdings. Besides, you may check if a portfolio is conservative or aggressive if it has the value or growth tilt.

Conclusion:

It provides the user-friendly interface that can also be used by a first-time investor. One has to fill in some fields such as monthly amount payable, investment tenure, expected return, and more that will generate the perfect worth of your invested amount.

Reasons For Using the SIP Calculator And Make Better Investment Portfolio:

When planning any mutual fund investment scheme, one needs to know the exact value of their invested capital. To understand this better, you need to use SIP Calculator as your best alternative.

As one has to look for an avenue that gives higher returns, Systematic Investment Plan gives feasibility for investing in the best investment method by doing small payment on a periodic basis. Furthermore, SIP Calculator will help to compute the right value of your investments after some interval of time. This helps to take the right decision and make the desired yields. Mutual fund calculator offers different benefits and here’re some reasons why it’s preferred the most:

Ascertains Monthly Payable Amount: At times, it becomes really difficult to choose the amount to invest and earn desired returns in the future. SIP Calculator will help in determining the right amount of money you can put in your mutual fund each month to meet your financial goals. Accordingly, this helps in making the right plan for achieving your investment goals.

Calculates the Right Worth of Investment: It’s very helpful in conceiving values that will be generated by a SIP on maturity. One will be able to maintain accuracy after considering its aspect. SIP calculator is made after contemplating all important parameters that include Internal Return Rate, Net Present Value, and Inflation Rate. So, it helps to generate the right values of an invested amount.

Feasible for All Types of MF Investment: No matter whether you’re making the offline or online investment in the mutual fund, SIP calculator can be used for both the cases. This will help each and every investor to take the independent decision according to their evaluation and approach.

Accelerates the Planning Procedure: As SIP calculator will calculate the definite ROI, it also helps to make your planning process very effective. One does not have to waste any time in doing analysis and research. Instead, just by calculating their returns and making some comparisons, you can take the right decision. Because getting higher returns is the main reason for investing in mutual funds.

Easily Accessible: For investors who do not have the right knowledge of the finance-related terminologies or calculations can use such a tool to make an effective plan.