What is SIP and what are its advantages in share market?
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Answer: SIP or systematic investment plan means to invest a fixed amount on a daily, weekly, monthly or quarterly basis. This type of investment plan is one of the safest and highest yielding investment plans you can think of.
The minimum amount you should invest is Rs 500. So, you can open SIP account of Rs 500 and withdraw your money at any time from this investment. You will get a compounding return on this amount.
Example:
Meet Ashish, who was determined to start saving after receiving a raise in his salary. Ravi Ashish’s colleague and a stockbroker’s active trader. SIP, or systematic investment plan, is a disciplined method of investing in mutual funds that he recommended to Ashish. You can start building a portfolio by investing a set amount of money, say 1,000 rupees, at monthly, quarterly, or annual intervals. SIP has a lot of advantages. It is cost-effective and teaches discipline, making it ideal for new investors. It’s simple and straightforward. The amount is deducted automatically through ECS once the process is started. You don’t have to worry about timing because you buy neutral fund units at different prices. The market, or market fluctuations, can assist you in achieving better results in lump-sum investments. You must save for a period of time before investing the money through a SIP. From the first day, Ashish begins to see returns, demonstrating the power of compounding at its best to maximise these advantages.