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What Are The Pros and Cons of an SIP Investment Plan?

Letu2019s now have a look at the positives and negatives of an SIP investment plan. Read now!<br><br>

Rahul_Patil_Investor
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What Are The Pros and Cons of an SIP Investment Plan?

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  1. What Are The Pros and Cons of an SIP Investment Plan? Systematic Investment Procedure, or SIP investment plans, has gained a lot of popularity over the past few years. This flexible and stress-free way of investing money in mutual funds allows investors to invest a certain specified amount at regular intervals of time. As a result of this success, SIPs have experienced a tremendous growth rate in the area of investment options. While it’s not necessary to open up an online demat account to start an SIP investment plan, whether or not it will be useful does depend on an investors’ requirement and understanding of the product. An online demat account does offer the facilities to keep and maintain many financial instruments in a single place. However, if you are just going to be investing in an SIP (i.e. a form of mutual funds), an online demat account is not a necessity. A demat and trading account is required if an investor wants to trade in equity shares. Basically, when a company lists its shares in the stock market, one can trade the same on an electronic system through a special account known as a demat and trading account. Both these types of accounts, as diverse as they may be, are crucial for any trading in the share markets. Let’s now have a look at the positives and negatives of an SIP investment plan: Positives of an SIP Investment Plan Flexibility to Start with a Smaller Amount A huge benefit of an SIP is that one can start it by investing smaller amounts and doesn’t need to rely on huge amounts in the beginning. Most SIPs even accept denominations as low as Rs 500 to start the investment plan. Streamlined Investing SIP investment plans inculcate discipline in the investing process by having an investor invest in the beginning of every month. With an automated SIP investment plan, one also doesn’t need to worry about the investment every month as it’s taken care of automatically. Cost Averaging This is the most important positive of an SIP. The value of your investment doesn’t get negatively affected by a volatile market. This removes the risk of feelings of regret of investing at the wrong time.

  2. Negatives of an SIP Investment Plan Average Returns Many trade analysts have actually concluded that SIPs cannot guarantee positive returns to an investor. The calculations of returns associated with SIP investment plans are also very cumbersome to calculate. Fixed Control In some ways, even with all its flexibility, an SIP investment plan is slightly rigid. If an investor wants to change the investment amount or timeframe, that particular investment has to be stopped and a fresh SIP has to be started. Availing PMS services in India, like that of a professional asset management company, is the best way to receive the best guidance and financial assistance regarding what kind of SIP investment plan to invest in or whether or not opening a online demat account or demat trading account is a wise decision. The most important thing to remember with an SIP investment plan is diversification of the investment so as to reduce risks and encourage profits.

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