Systematic Investment Plan (SIP)

Mains Paper 3 : Investment Models |

From UPSC perspective, the following things are important :

Prelims level : SIP

Mains level : Not Much

What is SIP?

A SIP is a way to invest in mutual funds wherein a fixed sum of money is put into a mutual fund scheme at a specified date every month.
It is considered to be investor-friendly and an efficient manner of investing in the capital markets as one can start investing with small monthly contributions instead of first building a huge investment corpus.
It is a hassle-free manner of investment as well since one can issue standing instructions to the bank for a specified amount to be transferred to the fund house/distributor every month at a pre-determined date.

How can one start a SIP?

There are two ways of starting an SIP. One can use the direct way of investing though the fund house or go through a distributor.
For direct plans, an investor can go to the website of the fund house for the scheme in which the SIP has to be started.
All the fund houses have a link on their portals for investors who want to start an SIP.
Typically, only the PAN and/or Aadhaar is needed to open an account.
Thereafter, one can select the scheme, SIP amount, starting date and duration of SIP.
If one opts for a distributor, then the same process can be done online on the distributor’s portal.

Benefits of a SIP

Timing the market is the most difficult thing when it comes to equity investment. SIPs, in a way, address this issue.
SIPs capture every rise and fall of the market and hence, an investor need not worry about the level of the market.

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