In this paper we will discuss about trading through systematic investment plan (SIP). It is very helpful and profit worthy for the small investors.
Systematic investment plan (SIP) refers to regular payments over a certain period, opposite of one time investment plans.
SIP allows the investors to run a mutual fund by paying a fixed, but small, amount of money regularly.
A stock trader can enter into the market with a nominal investment through systematic investment plan. Therefore, SIP takes the pressure out of the investors, especially small investors. So the minor investors can also take part in stock market activities.
A typical systematic investment plan comprises monthly investment for 10 to 25 years, depending upon the investors’ plan.
SIP does not allow the investors to own the fund directly. Instead of that, the investors will get interest periodically.
The traders can build their long-term plans, like, child education, home purchasing etc, through systematic investment plan. That is, they can save small amount over a long time. When the need will come, the cumulative figure of those small amounts will be sufficient.
SIP makes the average cost of an investor low. The traders can buy more shares when the price gets low and less number of shares while the price is high. Therefore, the average cost remains low.
The traders should understand the terms and conditions of an SIP investment before actively going for it. They should also make themselves clear about the investment objectives of the plan.