Systematic Investment Plans (SIP) are those investment plans that will allow a person to invest a fixed amount in to a mutual fund on a regular basis.
Individuals who want to start investing, yet are unable to do a bulk investment, would often opt for SIP plans.
These plans will allow user to invest a small amount on regular basis.
Usually, an individual would spend a fixed amount to buy a number of shares in a fund on a regular basis.
As the amount is stable, the number of shares bought out can vary based on the share value and market condition.
But one big merit of this policy is that it can impart financial discipline in a user by prompting him to set aside a particular amount regularly.
It's also a good plan for those people who wants to set aside a particular amount to fulfil plans such as tours, new vehicle etc. in a given time.
However, one demerit that the plan is that it's inherent rigidity.
As only a fixed amount is invested, it will be hard to capitalise on market fluctuations, particularly gains.
Also SIPs often require long time commitment as the time period of these schemes can be around 15 years.
First Published: IST