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|What is a (SIP) Systematic Investment Plan SIP in mutual funds?|
What is the meaning of SIP in mutual fund?
The systematic investment plan that is the SIP scheme provided in mutual funds, so let’s move forward and understand what SIP
is a type of mutual funds sip scheme
Which you are making a systematic investment in smaller amounts at a fixed interval of time, like, each month you are paying 1000, or 2000, as per the scheme you have chosen.
And what happens in a longer period, you would be able to avail good return out of it. Let’s see how SIP helps in minimizing that risk related to market fluctuations.
Consider a scenario of Sensex, it is an assumed data, where the timeline is from 2015 to 2022, and the market price is quite fluctuating, it is going up to 20,
Then falling back to 10 Likewise, it is going up to 20 and falling back to 15. Market prices quite fluctuating what happens when you are choosing this SIP scheme,
What is sip and how it works?
Your money is being invested in every phase of the market, whether in the UPS whether in the downs, your market is being sorry your money is being invested in each market phase.
What happens, a trend line is drawn which will show you that. Add then the benefit which you would be getting would be a benefit and the risk involved would be minimized.
SIP also helps you in availing a reduced purchase price, how does that happens just consider that you are, you have chosen a planning scheme for five months,
You are investing the amount of rupees 500 each month where the market price is quite between trading as you can see it was 20 then move to 25, then 30 and again it falls back to 23,
Depending on the market price and the SIP amount you have invested, you can avail the number of units of the assets.In total, when you have invested 2500 SIP amount, and the number of units which you were availing of the asset was 102 point six, two, the actual purchase price was 24.36
This was the purchase price which you paid, but here we can see the average net asset value or the price of the market was 24.8.
Because you chose the SIP came upon the price you’re saving while purchasing that asset because you are paying less than the actual price in the market.
These are some of the benefits, which we looked out for in SIP It provides you with an option of making a smaller amount of investment,
It helps you in reducing the market risk because your money is being invested in every phase of the market,
What is the difference between a mutual fund and a systematic investment plan ?
You are investing rather than saving makes you go nowhere saving puts your money at constant and you’re investing, it would give rise to your money.
If you are doing it for a longer duration of time it helped in reducing the average purchase price and the time value of money is being considered over here.
If you are putting your money constant it is your money value is decreasing with time because you’re investing your money, your money could phase with the coin time.
And that would be beneficial. I hope clearer about whether to go with this SIP scheme or not. It’s a safer scheme to go if you are a start in the investment market; you should choose the SIP schemes.