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
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