What Is Systematic Investment Plan [SIP]
systematic Investment plan provides a flexibility to opt for a sum, convenient for a person to be able to spare out of one’s income and save without any hardship to meet other necessities in life.
Systematic Investment Plan is a form of installment investment option available in mutual funds, equity shares, gold and many more.
SIP doesn’t mean, investing same amount on just monthly basis. It’s investing same amount on regular intervals. It can be every day, every week, every month or even every quarter.
You can invest 5,000 rupees on every Monday for 2 years. Or,You can invest 200 rupees on every day for 3 months. Or,
You can invest 500 rupees on every month for 12 months.
When you subscribe to SIP plan, banks will take money from your savings account on the mentioned date/day of interval, and deposit it in your SIP plan. Else, you can also choose to do it manually. It’s always advisable to go for auto debt payment to avoid the need for the investor to take the time off one’s routine schedule to go, and remit in the bank or the company where the investment is made on or before the due date.
Using Systematic Investment Plan, you can invest your money in some of the available ways mentioned below:
- To buy any company shares
- To buy NAV points in mutual funds
- To buy some grams of gold for the amount you can invest on every day/ week/month/quarter.
- To buy some bonds
What Is Recurring Deposits ( RD ) & How It Works
Recurring deposits are exactly same as Systematic Investment Plan [SIP] with respect to when to invest your money.
The only difference is, where you invest. In Recurring Deposits, you can only invest your money in the bank account on regular intervals only for interest amount.
You can’t invest in shares, mutual funds, gold or anything else other than for interest amount in recurring deposits. Most of people prefer recurring deposits over SIP plans is, to get assured amount without any risk of loosing money. Recurring deposit interest value doesn’t fluctuate with international or national stock market as it is the case with SIP.
Interest rate for recurring deposits varies from bank to bank and is usually between 7-10%. As soon as you invest installment, interest will be calculated from that day itself. The best advantage with recurring deposits is, you will get compound interest. Compounding may be quarterly, half year or yearly. It differs from bank to bank.