Mutual funds are managed by fund managers who decide in which portfolio they should invest the money pooled by investors. Investors invest in mutual funds either through Systematic Investment Plan (SIP) or lump sum to achieve their short and long term financial goals.
One of the easiest way of investing in the stock market is by opening a Systematic Investment Plan (SIP) account with a mutual fund company. SIP is a disciplined form of investing where a fixed amount is deducted from the investor’s account at regular intervals (like monthly, quarterly, yearly) and invested in the stock market. You can buy units on a given date each month so that you can implement a saving plan for yourself.
One of the biggest advantage of SIP is that you need not time the market. Every time is the right time to invest because, in the long run, all the losses and negative returns will be negated. Rather than you timing the market, investing each month will ensure that you are invested whether the market is at the high or low, making the best out of every opportunity.
It is also one of the easiest and efficient way to grow your money. It offers the benefit of rupee cost averaging and compounding. So over a period of time as the amount gets invested the power of compounding comes into play and helps build wealth in the long term.
SIP does not take much work on your part.
The paperwork requirements for starting an SIP are rather basic. You would need the following documents:
Proof of address (e.g. Aadhaar, passport, voter ID, utility bill, driving licence, etc.)
PAN Card
Passport-size photograph
Cheque book (to provide your bank details)
You can also take help from a financial advisor who can plan your investments based on you financial goal.
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