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What is an SIP?

April 26, 2017SIP

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What is an SIP?

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SIP means Systematic Investment Plan. This is one of the more effective investment strategy for accumulating wealth in a disciplined manner over a long period. A specific amount will be invested for a chosen period at regular intervals. For example, if an investor wants to invest Rs 12000 and makes a one-time investment at an NAV of Rs 15, 800 (12,000/15) units will be allotted. In the case of an SIP, the investor distributes Rs 12,000 over a year and invests Rs 1,000 every month. The amount will be invested at different levels of NAV, as market conditions and level of indices keep changing on a day-to-day basis. The investment in 12 installments will get averaged at different NAVs in an automatic manner without the investor timing the entry point.