Invest Safely through Systematic Investment Plans- Share Market Basics

Systematic Investment Plan is a feature specifically designed for those who are interested in investing periodically rather than making a lump sump investment. It is just like a recurring deposit with the post office or bank where you put in a small amount every month. The difference here is that the amount is invested in a mutual fund

SIP is provided by Mutual Funds to ensure that the investment goal is reached, and thus to compensate for a potential deficit if the systematic investment plan is interrupted due to premature death. It is a service option that allows investors to buy mutual fund shares on a regular schedule, usually through bank account deductions. Th nomenclature of this mode of investment can be different with some mutual fund houses; for example Reliance Mutual Fund calls it Recurring Investment Plan

Please be clear that a systematic investment plan is not a tool that helps improve your investment returns.

The primary objective of a SIP is to enable investors to clearly define an investment goal, and then to help them reach it through systematic investment in select equity-oriented mutual fund schemes that have a track record of consistent good performance.Most of the mutual funds offer this facility. The real value lies in the portfolio of the fund. Almost all schemes have the facility of steady investment plan.

Systematic investment adds value through rupee cost averaging and the power of compounding. The NAVs (net asset value) of these funds can vary widely, but, through rupee cost averaging, an SIP can make this volatility work for you. Many investors tend to think that monthly income plan and systematic investment plan are one and the same. The minimum monthly investment for a systematic investment plan is Rs 1,000. If you are in the 30-40 year age group, you should probably keep to an allocation of 30-40 per cent to equity investments. It is managed by a team of investment professionals and other service providers with advantages of professionals management, portfolio diversification, reducing risk, reduction of trading cost, convience and flexibility liquidity, access to information.

In simple words Systematic investment plan, is a simple, time-honored strategy designed to help investors accumulate wealth in a systematic manner over the long-term. Systematic Investment Plan is the most effective way of investing in market especially in a volatile market. SIP is a way to invest in a regular and disciplined manner while taking care of volatility. It is yet another investment technique which helps in mitigation of risk in terms of the entry point in an equity fund.

For individuals or families just getting started, based upon the above mentioned investment analysis, proper investment allocation is determined and asystematic investment plan is established through one of the many mutual fund families offered by various Mutual Funds in India - Principal Income Fund, Monthly Income Plan, Child Benefit Fund , Balanced Fund, Index Fund, Growth Fund, Equity Fund and Tax Savings Fund.

The best way to enter a mutual fund is through a Systematic Investment Plan. But to get the benefit of an SIP, think of minimum three-year time frame when you won't touch your money. Small but regular investments go a long way in creating wealth over time