Features of Systematic Investment Plan
Instalment investment at regular intervals makes SIP convenient and reliable for investors, making it beneficiary even for small investors. But this is just an extract of features we know, so let’s understand key features of SIP to make it easier to understand:
1. Secured Channel of Investment: SIP is a platform offered by Mutual Funds under which investment decisions are made by professional fund managers on the behalf of their clients, making it secure and risk efficient. Even a person with zero knowledge of the stock market can rely on SIP for long-term savings and investment benefits.
2. Time and Effort Efficient: Investment in SIP needs no separate time and effort from the investors. Once a person has opted for SIP, depending upon the Mutual Fund scheme, and agrees to terms of auto-debiting, the fixed amount is directly deducted from his bank account at fixed time intervals say a week. month or quarter. This feature makes SIP easy for all age groups, especially for young people busy climbing the stairs to success.
3. Disciplined and Organised: The most eye-catching feature of SIP is that it encourages discipline in investing habits of the investors. Investors get an addiction to saving and investing. Besides this, with each such investment, an organised detailed report is conveyed to the investors, indicating the no. of units held, information about new investments, and details of portfolio holdings along with the Net Asset Value (NAV) of the scheme.
4. Benefit of Compounding: The most promising feature of SIP is that it helps in availing the benefits of Compounding. Compounding is a method under which interest earned on the principal amount is re-invested for a higher return. The principal amount shall be kept invested along with the interest for a longer period to get a magnified earning in long run.
5. Ease to Stop or Skip: SIP plan can be exited at any point of time at the will of the investor. Once the investor step out of the plan, it is up to him/her whether to return to the amount or to continue investing in Mutual Fund. SIP unlike recurring deposits not create a burden of paying instalments each time. This means investors can skip the payment of instalments for the next time when they have no money without actually paying any fine.