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What Is Sip Investment All About? How Does Dynamic Sip Works?

By Author: swarali chavan
Total Articles: 27

In today’s time, it is necessary to have a proper financial plan to achieve short and long-term goals. However, it is challenging to accomplish these goals if you do not invest in the right investment option. It is necessary to select an instrument that offers higher returns over time.

Investment requires discipline and regularity to balance out the market volatility. The one investment tool that matches these requirements is SIP investment.

What is SIP?
SIP investment plan is the process where the investor invests in a mutual fund scheme on a predetermined date every month. It creates a substantial portfolio over a longer time, offering higher returns in the long run. They are open-ended funds. Hence, investors can enter and leave the fund anytime.

There are many benefits of investing in SIP investment:

• You develop a disciplined investment behaviour. A fixed amount gets deducted from your savings account every month which eventually gets invested in the fund of your choice
• You do not have to time the market when investing through SIPs. Since they are periodic investments, it works across the market
• You can begin investing in SIPs with a minimum amount of INR 500. Also, SIP investment is hassle-free and easy
• If you remain invested in a scheme via SIP for a longer time, you can earn interest on the invested amount. This is called the power of compounding

However, SIP investments have their shortcomings. As the investments are usually rigid under SIPs, it does not fully capture the benefits of the down market. The solution to this is dynamic SIPs.

What is dynamic SIP?

• It tweaks the amount of regular investment
• Dynamic SIPs also follow a systematic approach. So, the benefits are similar to that of traditional SIP
• It also varies the quantum of monthly investment based on specific predetermined rules. Thus, the investors invest a higher sum when the market is underpriced and lower when the markets are overpriced
• The overpricing and under-pricing decision is subjective

How does dynamic SIP work?

• Dynamic SIPs are also called opportunity funds. They identify the best opportunities and make the most of it
• When it comes to equities, there are various sub-categories such as mid-caps, large caps, small-caps, etc. Dynamic SIPs nature is to shift portfolio between multiple categories so that you receive best periodic performance from these schemes
• Fund managers of dynamic debt SIPs have the choice to change between short and long end yield curve. They can also shift between fixed and variable rate to make the best of the chances

When it comes to SIP investment, investors have the choice to select from a wide variety of funds and start investing within minutes.

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