We all know what is SIP, Systematic Investment Plan. This is the most common terminology used in mutual fund investing. But what is Equity SIP? how to start Equity SIP online?
SIP is the most preferred investment mode while investing in mutual funds. Investors have accepted and understood this method very well.
Before we jump into understanding what is equity SIP, lets first understand what are the benefits of SIP investment mode?
What is SIP or Systematic Investment Plan?
SIP or systematic investment plan as the name suggests is an organised method of investing a fixed amount in an asset class on a fixed date.
Benefits of SIP
Discipline -> Since SIP is an automated mode of investing, your money is deducted from the bank account, so a human error or influence does not bother the process like “I forgot”, I will do it tomorrow
Systematic -> because this is an automated process date and amount are fixed and selected by investor and hence the whole process is extremely systematic and slowly it becomes a habit.
Savings before Spending -> SIP also enables the habit of savings before spending.
So now that we know what are the benefits of SIP, let’s understand what is equity SIP.
Like you invest in mutual funds via SIP and you invest a fixed amount on a fixed date, Similarly Equity SIP is investing a fixed amount on a fixed date in a selected basket of stocks directly.
There are a lot of tools available in the market to enable Equity SIP. One can even do this manually by setting reminders and then placing orders manually. There several benefits of Equity SIP…
Benefits of Equity SIP
If you invest in equity for the long term in a systematic method, you could end up creating a lot of wealth for your self. The power of compounding kicks in and this small investment or SIPS ultimately create a lot of wealth for investors. However, there are just two factors that you need to consider
Selection of Stocks: the stocks that you select for equity SIP have to be quality stocks preferably blue-chip stocks of companies that could survive for a long time
Avoid Underinvesting: You should invest a substantial portion of your income and avoid underinvesting. Often people underinvest and expect markets to give them 200% – 300% return and make them rich overnight. Investing a good amount is important.
Now the next question in your mind would be I want to invest in equity but I do not know how to select stocks, so what do I do?
If you want to know more about Equity SIP, Please drop in a comment and we will be adding more information to this blog.
