SIP is a investment scheme in mutual funds. Open ended mutual funds offer SIP, through which one can invest a certain amount monthly, quarterly or yearly. Unlike closed ended mutual funds, it is never ending fund which is open for entry and exit any time. It is a disciplined investment approach to compound your earning in a long term.
Benefits of SIP
- Creates the Habit and Discipline of Investing Regularly
- Power of Compounding
- Convenience of Buying and Selling
- Helps Investor Stay in Control and Ride Volatility
- Light on the Wallet Compared to Lump-Sum Investment
What not to do in SIP?
1. Set a realistic goal based on your age, how long and how much can you invest. You can use SIP calculator to know your expected return. Don't expect beyond the reality.
2. Investment in SIP is never for Short term. At least 10 years should be the time frame to see the effect of SIP. If you wanna invest for short term share market, debentures may be other options.
3. Don't set high SIP amount expecting high return. SIP is set for long term goal so invest only that amount which doesn't effect you.
4. Setting Low SIP amount is also another mistake. Set a realistic amount at least minimum 1000 monthly.
5. Cancelling the SIP within 1-2 years seeing the decreased value of money. At least 10 years you should have patience.
Some Features of Investing in SIP are as follows:
Disciplined Investing: SIP promotes disciplined investing by encouraging regular contributions. It helps you avoid impulsive investment decisions based on market fluctuations.
Rupee Cost Averaging: With SIP, you buy more units when the market is low and fewer units when the market is high. Over time, this strategy helps average out the cost of your investments and reduce the impact of market volatility.
Convenience and Flexibility: SIPs are convenient as they automate your investment process. You can set up automatic deductions from your bank account, making it hassle-free. Additionally, you can choose the investment amount and frequency as per your financial goals.
Long-Term Wealth Creation: SIPs are ideal for long-term wealth creation. By investing regularly over an extended period, you benefit from the power of compounding, where your money grows exponentially.
Affordability: SIPs allow you to start investing with small amounts, making it affordable for individuals with limited funds. You can increase your investment gradually as your financial situation improves.
Diversification: Mutual funds offer a wide range of investment options across various asset classes and sectors. By investing in SIPs, you can diversify your portfolio and reduce risk by spreading your investments across different funds.
Professional Fund Management: When you invest in SIPs, your money is managed by professional fund managers who make investment decisions on your behalf. They have the expertise to identify promising investment opportunities and adjust the fund's portfolio based on market conditions.
Transparency: Mutual funds provide regular updates on the performance and holdings of the funds, allowing investors to track their investments easily. You can monitor the progress of your SIP investments through periodic statements and online portals.
SIPs in Nepal
Till date SIP is offered by seven capitals.
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