A mutual fund is a pool of funds from a large number of investors and investing further for returns. Mutual fund investments are a lot easier than buying and selling individual stocks. Entry & exit becomes a lot easier and at the same time attracts better returns.
Mutual Fund Management in Professional Manner
Professionals monitor the investments on each fund so that investor will get the maximum benefits on investments. Investor gets a PORTFOLIO and it could have the stocks, bonds, money market instruments or a combination of those in which the investor has invested.
Fund Ownership Just like a shareholder where an investor holds shares of the company, in case of mutual funds one holds a share of the fund and not the security. The mutual fund investments are flexible and the amount of investment depends upon the investor. Still the investors benefit from the returns on the huge investment, which arise due to the given collective fund scenario.
Mutual Funds are diversified
Mutual fund investments provide better diversifies options of investment, which further reduces the risk. Volatility in individual scrip will not effect the overall returns, because the performance of the entire fund depends on number of securities listed in it.
What is SIP?
A Systematic Investment Plan or SIP is an investment plan for investing money in available mutual funds in the market. Through SIP you can define a budget to invest on regular basis depending on the time interval you have selected for investment like weekly or monthly or quarterly investments. It can be termed as a planned investment method to have a secured future with good returns. That’s why it is now a days is one of the one of the right way to plan your savings for your future in a better way.
Working of SIP
It is a flexible and easy investment plan. The method is that the finalized investment amount will get debited from your account on a pre-defined time interval say weekly, monthly or quarterly and invested automatically in some specific mutual fund scheme. On that basis, you are allotted some number of units depending on the market rate on that day.
The meaning of Rupee cost averaging
As market situation is volatile, mostly investors keep on thinking about the best time to invest to get high returns on their investment. For a regular investor who invests certain amount at regular intervals, the investment will draw more shares/units when the price is low and vice-versa. The average cost achieved would be lower during the times when markets witness high volatility.
It’s as simple as - sooner you start investing, the more time your money has to grow.
If your investment grew by an average of 7% a year (assuming), then you can get high returns on your investment for a specified pre-defined term.
Other Benefits of Systematic Investment Plans?