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.