What is SIP, and how it works.
To grow your money, you must invest it in the suitable instruments that help you earn inflation-adjusted returns. As a new investor, you can consider SIP Mutual Fund investment. Find out what is SIP and how it works in this article.
A Systematic Investment Plan or SIP is a popular method of investing in Mutual Funds. You can invest a fixed amount at regular intervals (fortnightly, monthly, or quarterly) with SIP. You are allotted the Mutual Fund units per the Net Asset Value (NAV) on your investment date and do not have to worry about market volatility.
You can link your bank account and provide standing instructions to automatically debit the SIP amount on a fixed date from your bank account. You must fill a form providing your personal and SIP details, including your name, bank name and branch, account number and IFSC code, SIP amount and date of investment to initiate the auto-debit facility.
Let us find out how SIP works with an example.
You decide to invest INR 5000 on the 7th of each month in XYZ Mutual Fund.
As is apparent, you typically get more Mutual Fund units when the market is down, whereas fewer units are allotted in a bullish market. This averages out the cost of investing and is referred to as Rupee Cost Averaging.
SIP investments are for everyone. While the minimum investment permitted in SIP is INR 100, there is no upper limit on the investment. If you stay invested for longer durations and reinvest your profits without redeeming them, you stand to gain compounding benefits.
The time to invest is now, and you can start your first or next SIP investment with digibank by DBS.
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.