Stock market i.e. risk. Investing in equities (stocks) is considered to be one of the most risky investment strategies. However, it is also more likely to return against the risk. Returns can also get bumpers along with risk in equities. Today's investors are always looking for an option where the return is bumper but the risk is low or not. One of the best ways to handle this is to invest in equities without taking high risk.
What are Equity SIPs?
An equity SIP or equity systematic investment plan is just like any other SIP where you invest in stocks periodically every month. In SIP your money is invested after a certain period of time instead of a lump sum. Equity SIP invests only in shares of various companies depending on the theme or type of SIP. You can choose the period of investment according to your convenience. The most common is monthly SIP. Equity SIP helps you build a large fund / asset in a very disciplined manner. You can set a default amount to invest. For example, if you pay Rs. If you decide the amount of Rs.2000 then Rs.2000 will be withdrawn from your bank account every month and that amount will be used to buy equity SIP. You can also pay manually or you can use the automatic investment option. The specialty of Equity SIP is that it helps you to earn from the equity market but the risk involved in investing in direct equity does not fall directly on you.
Features of Equity SIP
1. You earn Rs. You can start investing in an equity SIP even with a nominal amount of Rs.500.
2. The concept of equity SIP is based on the average value of rupee.
3. You can choose Amount-Based or Unit-Based SIP - In Amount Based Equity SIP you will invest the same amount like Rs. 500 per month. While quantity based equity SIP means you invest in certain units of stock. For example, you buy 10 units of an equity SIP fund every month.
4. You can decide any period to invest. For example, if you choose quarterly investment, you will have to pay quarterly or your account will be deducted on the due date.
Why You Must Consider Equity SIPs?
The main reasons why Equity SIP is the best option for your portfolio -
1. First of all SIP helps to reduce volatility risk by using rupee cost averaging concept. Investors who invest a fixed amount after a regular period get more share units in the same amount when the share price is lower. This average pricing system protects your investment against market fluctuations.
2. Like long term investment in equity, this SIP is also the best long term investment option. If you look at your accumulated wealth by investing for a certain period of time, you will also be amazed at the amount of funds raised. In addition Equity SIP You can invest even with a small amount for which you do not have to wait or raise a large fund and you can get more profit by making a small investment in the long run.
3. You can reap the benefits of compounding when investing in equities for a long time. For example, you get Rs. 500 and on this investment Rs. 20 returned. Now next month you will get Rs. If you invest Rs.500 then your total investment is Rs. 500+ Rs. 500 + Rs. 20 (profit) that total Rs. 1020. Now the return on new investment will be at this compound value. Thus cumulative investment helps in quick wealth creation.
Equity SIP is one of the best options for your portfolio if you are looking for big long term returns with low financial volatility risk with financial discipline and want to build wealth in the long run.
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