Source: The Economic Times.
One of the best ways to invest in the equity market is through the systematic investment plan (SIP) route. This enables investors to take the benefit of averaging out their cost of investment. There have been several developments recently due to which the minimum amount of investment in SIPs has fallen. While investing in SIPs, a certain sum of money is invested each month for a specified time period. Three things have to be considered here:
The limit for SIP refers to the minimum amount with which one can start a SIP. Sometimes, mutual funds reduce the limit for a SIP for the convenience of investors. However, this does not mean that all investors have to make use of it by exactly meeting the lower end of the limit. The smaller limit for SIPs is attractive for those individuals who are just starting their investment process or those who cannot afford large sums. Individuals who have just joined the workforce and want to start investing are often unsure about how mutual funds or other investment schemes work. Participating in SIPs is a good way to initiate their investment process to meet future requirements. Individuals from the unorganised sector, having low incomes, also benefit from the lower SIP limit. These individuals can now invest very small amounts in pension schemes. However, individuals who want to build a secure future with the help of mutual funds should invest larger sums to build a large corpus over the years. Investors should also concentrate on the performance of the fund and whether this can help them to achieve their financial goals. That should be the basis for selecting a particular mutual fund scheme. Smaller minimum investment amounts should not determine an individual's investments.
One of the best ways to invest in the equity market is through the systematic investment plan (SIP) route. This enables investors to take the benefit of averaging out their cost of investment. There have been several developments recently due to which the minimum amount of investment in SIPs has fallen. While investing in SIPs, a certain sum of money is invested each month for a specified time period. Three things have to be considered here:- The first is the amount that is invested each month.
- The second is the frequency of investment. Most people select the monthly option.
- The third point here is the duration of the systematic investment plan. Investors can invest in SIPs for as long as they like. They can even extend the SIP and select the time period they are comfortable with. The time period is not too important because if a person invests say, Rs 1,000 a month for a six-month period, then after the time period is over, s/he can run it for another six months or even a year. Even the amount of systematic investment plan can be increased or decreased as per the individual's requirements.
The limit for SIP refers to the minimum amount with which one can start a SIP. Sometimes, mutual funds reduce the limit for a SIP for the convenience of investors. However, this does not mean that all investors have to make use of it by exactly meeting the lower end of the limit. The smaller limit for SIPs is attractive for those individuals who are just starting their investment process or those who cannot afford large sums. Individuals who have just joined the workforce and want to start investing are often unsure about how mutual funds or other investment schemes work. Participating in SIPs is a good way to initiate their investment process to meet future requirements. Individuals from the unorganised sector, having low incomes, also benefit from the lower SIP limit. These individuals can now invest very small amounts in pension schemes. However, individuals who want to build a secure future with the help of mutual funds should invest larger sums to build a large corpus over the years. Investors should also concentrate on the performance of the fund and whether this can help them to achieve their financial goals. That should be the basis for selecting a particular mutual fund scheme. Smaller minimum investment amounts should not determine an individual's investments.
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