SIP Full Form

SIP (Systematic Investment Plan) is a form of investment mode followed by mutual funds to attract investors to invest small amounts in intervals/periodically instead of lump sums. This process takes place usually weekly, monthly and quarterly. For Example, you can invest with a minimum amount of Rs. 500 and ask your bank to debit the specific amount every month. The SIP tool plays an important role in managing the financial system at ease in a disciplined manner.

How to Calculate a SIP?

To calculate SIP (Systematic Investment Plan), there are four steps given below that provide accurate results:

  1. What will be the SIP Amount? 

According to the customer income structure and risk appetite, it may vary; therefore, a customer can enter any amount whatever he wishes, then he has to sacrifice that prefixed amount on a monthly or quarterly basis. 

  1. How Many Months SIP Can Continue?

It totally depends upon the customer how much SIP payments he/she wishes to make.

  1. How Many Months Ago did the Customer Start the SIP?

If a customer already started and has an ongoing SIP, he/she needs to put the number of payments that have already been made. Or if the customer hasn't started SIP, he/she has to enter zero.

  1. What is the Rate of Interest Expected by the Customer Per Annum?

Firstly, the motive is to earn good returns in Mutual Funds when a customer is investing. With the help of calculated SIP, customers can adjust the rate of interest. They can make their own decision by entering a few details after which SIP calculator will generate accurate results. By seeing all these, customers can judge himself on his Return On Investment.

Advantages of SIP

  1. SIPs are Pocket-Friendly 

It enables you to invest on small scales periodically for a certain time frame like weekly, monthly, quarterly.

  1. SIPs Focus on Rupee-Cost Averaging 

It (SIP) works better when it comes to low-cost investment plans, you can buy more mutual funds schemes when prices are low and similarly you buy few mutual units when prices are increased.  This develops a good balance between rupee cost averaging.

  1. SIPs are More Effective For Future Plans

Everyone has their own goals for the future to buy a home, buying a dream car, well-planned life but all this includes effective goal plans.

  1. SIPs Scheme Benefits From the Power of Compounding For Long Term Investment. 

It enables you to compound your money invested, let’s say you have invested Rs. 1000 in a mutual fund scheme with SIP tenure of 20 years and anticipate a return of 15% p.a., where your money grows approx to 15 lakh.

What is the Power of Compounding?

The power of compounding is nothing but a concept in which interest is earned on the investment made by the customers.

SIP vs. Mutual Fund

SIP is a tool which is used for investing in mutual funds. SIP helps investors to save a small amount and pile up wealth for the long term. SIP is slightly similar to a bank recurring deposit. Customers can stop or redeem their SIP anytime if at all it is not lined with ELSS ( ELSS has three years of lock-in period).

MUTUAL FUND is a fund that is made up of securities that differ from equity, fixed income or both. It is professionally managed by financial institutions that take money from many investors to purchase stocks, bonds, money market instruments, etc. It is a platform of opportunity for investors to invest in their daily activities. 

Is SIP Safe? 

Yes, SIP is safe in investing in mutual funds schemes. Moreover investing in mutual funds will end up with a huge cost on mutual funds; in order to invest in mutual funds, you need to have a strong knowledge of market survey. While in SIPs, you need to check on the market status, though it hardly costs a small amount to invest every month. Price may fluctuate (some months either high or low). If it is considered for a long term plan,  the price you pay will be the average of high and low. That is called rupee-cost averaging.

FAQ (Frequently Asked Questions)

Q1. What is the Full Form of SIP?

Ans: SIP is referred to as a Systematic Investment Plan. SIP (Systematic Investment Plan) is a form of investment mode followed by mutual funds to attract investors to invest small amounts in intervals/periodically instead of lump sums. 

Q2. What is the Count of Installments in SIP?

Ans:  SBI has revised the minimum revised instalments. As per this,

Weekly SIP - 6 (minimum no. of instalments)

Monthly SIP- 6 (minimum no. of instalments) 

Quarterly SIP- 6 (minimum no. of instalments)

Daily SIP- 6 (minimum no. of instalments)