Systematic Investment Plan

 Brief about Systematic Investment Plan

 Popularly Called as SIP investments or SIP.

SIP is a smart and hassle free mode for investing money in various Asset Classes

SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you to making habit of saving and building wealth for the future.

SIP is a disciplined approach to investments.

Why to Invest?

Its very simple .. just to make Money.

there are only two ways to make money:

by working and/or by having your assets work for you.

If you keep your money in your back pocket instead of investing it, your money doesn't work for you and you will never have more money than what you save.

most of us were taught that you can earn an income only by getting a job and working. And so that's what most of us do. But there's a limit to how much we can work and how much money we make out of it–not to mention the fact that having a bunch of money is no fun if we don't have the leisure time to enjoy it.

So, since you cannot create a duplicate of yourself to increase your working time, you need to send an extension of yourself–your money–to work.

By investing your money, you are getting your money to generate more money by earning interest on what you put away or by buying and selling assets that increase in value.

There are many different ways you can go about making an investment. This includes putting money into stocks, bonds, mutual funds, real estate, gold etc. The point is that no matter the method you choose to invest, the goal is always to put your money to work so it earns you an additional profit.

What are the Different types of investments?

There are different types like

ü     Financial Assests

ü     Bonds

ü     Stocks

ü     Money Market Instruments

ü     Mutual Funds

ü     Insurance

ü     Financial Derivatives

ü     Others..

Its go one by one in brief.

Financial assets are a number of financial assets can not be traded with a third party such as

ü     Bank Deposits -  they are made to deposit accounts at a banking institution, such as savings accounts, checking accounts and money market accounts. We get interest on our deposits

ü     Post Office Savings - post offices operated or continue to operate postal savings systems to provide depositors who do not have access to banks a safe, convenient method to save money and to promote saving.

ü     Provident Funds - A provident fund is a form of social safety net into which workers must contribute a portion of their salaries and employers must contribute on behalf of their workers. The money in the fund is then paid out to retirees, or in some cases to the disabled who cannot work.

ü     Chit Funds - A Chit fund is a kind of savings scheme practiced in India. A chit fund company is a company that manages, conducts, or supervises such a chit funds

ü     Company Deposits - deposit can include large commercial companies, public institutions, government agencies and large non profits.

Bonds are debt securities or long term debt instruments. An authorized issuer of bond promises the person who holds the bond to pay interest on particular periods and to return the principal after a fixed period  like at the time of maturity of the bond.

There are Different types of bonds , they are

ü     Government Securities -

ü     Government Agency Securities

ü     PSU Bonds  

ü     Private Debt Securities

ü     Preference Shares

ü     Mortgage Based – Securities

Bonds are one of the most common investments ,

How ever many investers has confusion.

Company or government issues bonds and barrow the money from investors for funding projects and expenses, bonds are less risky and alternate to the stocks, each bond has issues with face value, investor will receive regular interest,

 Stocks represent ownership. A person who holds stocks of a particular company is treated as one of the many owners of the company and deserves a share of the net profit that company earns after all expenses. Stocks is one of the best investment options available and at the same time it demands knowledge about many fundamentals to make a decent return.

Different types of stocks (as classified by financial analysts)

Growth Stocks - a company stock that tends to increase in capital value rather than yield high income.

Value Stocks- shares of a company with solid fundamentals that are priced below those of its peers, based on analysis of price/earnings ratio, yield, and other factors

Blue Chip Stocks - A blue-chip stock is the stock of a large, well-established and financially sound company that has operated for many years. A blue-chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector

Income Stocks- An income stock is an equity security that pays regular, often steadily increasing dividends, and offers a high yield that may generate the majority of overall returns.

Money Market Instruments

Money market instruments give businesses, financial institutions and governments a means to finance their short-term cash requirements. Three important characteristics are: Liquidity - Since they are fixed-income securities with short-term maturities of a year or less, money market instruments are extremely liquid.

These are debt instruments with less than 1 year duration for maturity.

Different types are

Treasury Bill

Commercial Paper

Certificate of Deposits

Mutual Funds

It is an investment program funded by shareholders that trades in diversified holdings and is professionally managed.

Mutual Funds are a better investment option for those who can’t find time to learn about stock market and it’s trends or those who don’t understand it’s working correctly.Mutual funds are usually managed by a Private financial company or a Bank.

Different types of mutual funds are;

Stock based schemes

Fixed income schemes

Monthly income schemes

Tax saving schemes

Hybrid schemes

Balance schemes

Sector schemes

Floating rate schemes

Insurance

Insurance is also a form of investment but I don't prefer them. As a piece of advice don't mix investment and Insurance.

Different types of insurance investments are;

Endowment assurance policy

Moneyback policy

Whole Life policy

Term assurance policy

Unit Linked Policy – ULIP

Financial Derivatives

These are financial instruments that are formed from value addition of the financial assets used for investment.

Two types are there;

Options

Futures

Alternative investments are buying or investing money on precious metals such as gold , silver , diamonds or  real estates like houses lands or plots.. etc

So, Plan Your Investments..  Get Started…

ü     List down your dreams and goals and work out a plan to achieve them through SIP

ü     Plan the monthly/quarterly SIP required to achieve your goals

ü     Identify the scheme(s) in which you would like to invest and complete the formalities for SIP investment including  Mutual Funds or Bonds

ü     Invest for the long term as the twin benefits of power of compounding and rupee-cost averaging work through different market cycles

ü     Diversify your investments for your dreams through multiple SIPs in different schemes to optimize returns as per your needs.

Happy Investing….  J