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Advantages of SIP

Systematic Investment Plan (SIP)

SIP is a disciplined way of investing, where you invest fixed amounts at a regular frequency say, every month. It is bit by bit systematic investment.

How does a SIP work?

  • Decide the amount to be invested per month
  • Choose a scheme
  • Issue cheque for 1st installment
  • Future installment will be debited from your Bank Account

Illustration

Month Amount Invested Rising Market Falling Market Volatile Market
NAV Units NAV Units NAV Units
1 1,000 10 100.00 10 100.00 10 100.00
2 1,000 12 83.33 8 125.00 12 83.33
3 1,000 14 71.43 6 166.67 8 125.00
4 1,000 16 62.50 4 250.00 10 100.00
Total 4,000 52 317.26 28 641.67 40 408.33
Average NAV

(Sum of NAVs / Total No. of SIPs )

13.00 7.00 10.00
Average costs per unit

(Total Investment / Total Units Alloted)

12.61 6.23 9.80

This shows that SIP is best in Volatile & falling Markets.

Starting a SIP is the first step, that may take you a long way towards achieving your financial goals.