What is SIP? Why it is important to know before investing in Mutual Fund. Learn how it works?
Let’s understand the concept of SIP:- SIP is a facility offered to its investors by Mutual Funds, which gives them the opportunity to invest on a certain fund in a fixed time frame. This facility is called Systematic Investment Plan (SIP).
Before investing in Mutual Funds, it is always told to the investor that through SIP you can get a good return. According to experts, in the last few years, investment in Mutual Funds through SIP has increased rapidly and according to the market has also given good returns. If you also want to earn a great earning or a bang on your savings investment then SIP is a good way.
What is the minimum amount of investment in SIP:-
Mutual funds give their investors the opportunity to invest in SIP’s even at extremely low amounts. The minimum investment amount in a SIP can be 500 rupees and less. However, very few Mutual Funds only give an opportunity to invest in small amounts. In this way, investing a certain amount within the specified limit can fetch the investor good returns.
How long can one invest in SIP:-
SIP works on a long-term investment plan. In which most of the investments can be taken for 10, 20 or even 30 years. At the same time, the shortest duration for SIP can be 6 months. In the longer timeframe of SIP, the investor has the option to increase or decrease the fixed amount. But, in the short term, the risk of investment is high.
Learn how SIP works:-
When an investment is made in a Mutual Fund through SIP, a certain amount is withdrawn from the investor’s bank account every month under the chosen investment. In return, the investor is given a fixed number of Mutual Fund units based on Net Asset Value (NAV).
For example, suppose you invest 1000 rupees every month through SIP and the value of NAV is Rs.20 on the Mutual Fund scheme as you have selected, so according to this scheme, you will get 50 units. Thus, if the Mutual Fund Scheme’s NAV increases, then your investment also increases. Suppose after one year the NAV of this scheme becomes 30 rupees, then the 50 units that you had bought, now their price will be Rs 1500. Likewise, by investing in a Mutual Fund through SIP, your money keeps increasing year after year and later gives banging returns.
In this article, we learned about the SIP and how it works. I hope you enjoyed this article and your valuable feedback is always welcome.