Systematic Investment Plans (SIPs) are an excellent option for most users, particularly for those looking to make long-term investments. At the onset, it must be said that Systematic Investment plans (SIPs), particularly a SIP in stock market, are not meant for a short-term investment. And it may need some discipline for one to make these investments and not be scared when the market is down. This article is going to cover all the basics of Systematic Investment Plans (SIPs) in detail.

Why are Systematic Investment Plans (SIPs) attractive investments?

Simply because they are systematic, they are done with a simple, long-term goal in mind. Thus one need not worry about the market’s rises or falls. Moreover, most investors earn a fixed sum every month. Therefore, their savings and, in turn, additional sums for investment are likely to be similar; the Systematic Investment Plans (SIPs) try to maximize the benefit from this sum. They are invested in stocks that give a compounded annual return, thus providing the possibility of real wealth addition even after adjustment against inflation. The wealth is likely to erode if one was to invest in safe-haven such as fixed deposits. 

Can one skip a Systematic Investment plans (SIPs) installment?

Yes. The reader can skip a Systematic Investment plans (SIPs) installment by sending an advance cancel request. One can do this online. Such a cancellation request attracts no penalty. One previous investment is going to be the same if one skips an installment, whether or not one sent a cancel request. However, in case one had sent a cancel request, the whole plan won’t be canceled, which might happen if no such communication was made. Moreover, the failure of the communication might result in some bank charges.

Should one disinvest if the market is down?

When the market is down is precisely the worst time to cut back one’s investment. Here, The reader must remember that Systematic Investment plans (SIPs) are long-term investments. It doesn’t matter where one’s investments stand today, but where they will be in the future.

Should one skip a Systematic Investment plans (SIPs) installment if the market is down?

No. On the contrary, when the market is down, Systematic Investment Plans (SIPs) will buy one more net asset value. When the market is down, one should actually look to buy more stocks if possible – as one is investing for the long term and short term. One should also not skip it when the market is bullish, as one can’t always wait for it to crash before investing. Typically speaking, one should miss a Systematic Investment Plan (SIPs) only when one lacks liquidity and is unable to invest due to the same reason. And one should do so after making a communication regarding the same in the procedure mentioned above.

What if one needs to dip in one’s savings?

Systematic Investment Plans (SIPs) are passive investments that one should only invest in for the long term and definitely should think of drawing from the same. If the reader has short-term cash needs, it is wiser to meet them from other sources such as through small loans, buy now pay later schemes, etc. If the reader is thinking of starting to invest in Systematic Investment Plans (SIPs), it is also advised that they should begin to leaving a small sum aside and thus create a separate savings pool apart from their Systematic Investment plans (SIPs) which they can use for emergencies. It is important to remember that it is not wise to depend on the Systematic Investment Plans (SIPs) directly for such emergencies as the market may be down at the time one has such a need for funds.

Are Systematic Investment plans (SIPs) safe?

No investments are safe. While investments like bonds and fixed deposits carry minimal risk, they also give very little by way of return. In fact, one’s wealth invested in such securities as bonds actually erode if the inflation rates are high.

What is a smart Systematic Investment plans (SIPs) investment strategy?

A smart Systematic Investment plan (SIPs) is to stick to the plan and make the systematic investments as the plan requires with all the discipline one can muster. It is easy to feel tempted to sell the stocks when the price is high, or one may do it out of fear when the market is down – however that beats the point of investment in both cases, which is long-term wealth generation. Thus, one should also invest only so much of one’s savings in this plan as one can easily spare every month. Another important part of a smart strategy would be to also create another small pool of savings to meet any sudden financial needs.

The Bottom line

One can easily conclude from the above discussion that SIP in stock market is an excellent investment option, and readers should definitely consider investing in them.


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