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All about Equity SIPs

The main purpose of the investment is to earn good returns and create wealth over a period. With numerous investment vehicles available in the market, it often becomes difficult to make the right choice.

One of the most common and popular avenue for investment in Indian markets is a Systematic Investment Plan (SIP). You may buy shares in a similar manner by using a service known as equity systematic plan. Through such a vehicle, you may buy gold exchange-traded funds, index exchange-traded funds, and shares through a regular interval of time. Based on your choice, you may opt to invest at varying frequencies on a daily, weekly, or monthly basis.

Equity SIP is an ideal mode of investment for salaried individuals, who do not wish to invest a lump sum amount, but who want to build a long-term portfolio by investing in stocks. By making small investments on a regular basis, they may enjoy the benefit of rupee cost averaging. This helps them build a sizeable corpus, thus helping them create wealth over a period. Investing for a long duration negates short-term and medium-term volatility and helps obtain optimum returns.

Method to invest in equity SIPs

Quite contrary to the popular belief that the procedure to invest in an SIP is cumbersome, the same is not true. All you need to do is identify your preferred stock or a group of stocks. Once you determine the stocks you wish to invest in, you may register for Equity SIP (ESIP). You may then contact your broker and ask him to complete the formalities.

The broker will then place the order for the mentioned number of stocks at the interval you have chosen. For example, you may register an ESIP to purchase 10 shares of a particular company each week. The broker will then place the order for buying the shares. For this purpose, you need to maintain the necessary amount in your bank account. You then have to sign a mandate that allows your broker to collect the funds from your bank account.

Features of ESIP

One of the most popular features of an ESIP is flexibility. You may modify the ESIP to suit your needs. You may change the frequency of your investment. For example, you may switch from a weekly investment to a monthly investment. Additionally, you may also change your investment if you wish to do so. You may even stop making an investment towards you ESIP if you are facing a cash crunch by simply pausing it.

An Equity SIP helps you invest in the market in a disciplined manner. However, an important aspect to keep in mind is diversification. It is necessary to identify the best-performing stocks and create the best portfolio. By doing so, you may stay invested long-term, earn good returns, and achieve different life stage goals quite easily.

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