Systematic Investment Plans (SIP) of Mutual Funds ensure balanced income

Systematic Investment Plan in mutual fund products is very lucrative option among small investors who are consistent in their savings on monthly basis.

In normal scenario an investor can buy online mutual fund units as one time transaction at market rate of transaction day. If the amount of investment is high one would be very skeptical to take a call on when to invest this money in mutual fund.

SIP is an option wherein you can choose a mutual fund product online and opt for monthly equal investment amount. In this scenario a particular amount (ofcourse you only would define that amount) would be deducted from your bank account on defined predefined day of every month and will be invested in mutual fund you have chosen.

The key benefits from SIP are :-

Averaging of Market fluctuations :- SIP over a period of time gives a consistent return as compare of one time transaction. If your one month buying is at 1% higher rate, the next month buying could be 3% lesser than earlier and this goes on till the maturity.

Lower Brokerage :- Brokerage would be marginally lower than one time transaction, so it gives an edge over one time transaction.

One time effort :- Once you opt for this transaction online, you need not do anything except ensuring that you have money in your account to the extent of SIP monthly installment amount. Balance part of investment exercise would be taken care by bank with whom you have demat account.

Part of Market :- Your SIP Mutual Fund investment returns would be the real representation of market journey of SIP period as every months Mutual Fund's NAV would be recorded in your investment.

The due diligence need to be exercised while choosing mutual fund product for SIP purpose. Make sure you pick up best of the product in line with your Investment Goals, Risk Appetite and Liquidity situation.

To re-iterate from my last post, look at the longer period of any mutual fund product for performance and compare it with peers and stock market evolution. Check out their investment portfolios, higher diversification of investment can be a good indication towards consistent returns. On the contrary Sector specific products can either bring very high returns or just nothing.