Systematic Investment Plan is bringing about a revolutionary change

It is rightly said, “ Each revolution begins with an Idea”. No change can be made in a single day. It takes a long duration to conceptualize any idea. Identical is the case with the investing industry. The emergence of Systematic Investment Plan (SIP) on the horizon of the mutual fund industry is a revolutionary concept. Making it tough for its rivals like RD (Recurring Deposit), SIP is fast emerging as a fertile source of planned monthly investment. The SIP has been the prime focus of the investors who want to invest consistently over an extended period of time. Just like its name Systematic Investment Plan, actualizes itself in the application also. SIP is nothing but a regular installment that an investor pays for a prolonged period to enjoy a good corpus.

But, SIP should not be confused as an investment itself. Technically, SIP is just a method of investing in the online mutual funds; it is not an investment. Many times people start believing that Systematic Investment Plan is the scheme in which they are depositing their money. Such is not the case. SIP is a facility extended by the mutual fund industry to those investors who are not comfortable with lump sum investment.

Comprehending the concept of NAV in SIP

SIP is nothing but a regular investment in the capital market through a more secure network (Mutual Funds). The installment that a client pays on a daily, monthly or quarterly basis is pooled up with all the other investors money and finally put in the capital market. For each installment the client deposits as SIP, he/she gets some units of a scheme. These units are similar to the shares that one gets on investment in stocks. The units are allotted on the basis of NAV (Net Asset Value). NAV is the price per unit of any particular scheme prevailing on a certain day. In simple words NAV is the cost of buying one unit of a scheme under the mutual fund. It alters as the market fluctuates. The closing NAV for a certain day is taken as the NAV for that particular day.

Focusing points for investors :

The investors need to focus on some of the points so that they do not error while investing. They are the following:

• Don’t invest and forget: Timely monitor the performance of your Systematic Investment Plan. It is your money, and no one can take care of it like you. When you examine SIP on regular intervals, then the chances of loss become negligible. At the same time, you need not be too conscious.
• Diversify your investment: Never take up identical plans for all your investments. For example, in one scheme you can take a monthly SIP, for another you can opt for a quarterly. If you have all identical SIPs, then it will pressurize you. You will have to pay a lump sum but in a disguised form. Warren Buffet indeed said, “Don’t put all your eggs in a single basket”.
• Never take star rating as the benchmark: The star rating is no benchmark for investing in the SIP. The score keeps varying on the monthly basis. You need to understand that the choice of schemes should center on the requirements of investment and not on the rating it earns, as it keeps varying.

Bearing in mind, the simple steps of investing you can attain copious profits. A smart investor can make more progress than a hard-worker. Now is the world where we need to manage our wealth wisely and smartly. Therefore, don’t just focus on earning money, invest to multiply it fast.