Systematic investment plans, or SIPs, are popular investment terminology. SIPs have been touted as being the ideal way to invest and build wealth over the long-term. Every investment expert talks about SIPs in such a way that investors might think they are the cure to all ills. But is investing systematically really as great as it is made out to be?
Let’s look at the benefits of systematic investment plans to answer that question.
Why start an SIP?
`Building discipline and to Protect yourself against market volatility`
Timing the stock markets is one of the toughest things for an investor to do. Often, it is also not necessary because of the risks it carries. Investors often worry about when and how much to invest. SIPs take this worry away. A systematic investment plan is a disciplined way of investing a fixed amount at regular intervals. By eliminating the need to constantly monitor the markets, it helps protect the portfolio against market volatility.
`Buy more when the price is low, less when the price is high`
When you are investing via SIPs, you are investing a fixed amount on a fixed date. If on that date, the stock price is high, you will receive fewer shares. And vice versa. This ensures that you invest more at lower prices and less at higher prices, and hence your overall cost of acquisition gets averaged out.
`It’s all about time in the market, not timing the market`
The key to becoming wealthy is not only to start investing early but to also continue investing and stay invested. When you stay invested, you starting earning returns on not only the new amounts you invest but also on the returns you have already earned. This is called compounding and it works like magic to help you build wealth.
How do I start an SIP with Teji Mandi?
Teji Mandi’s portfolio allows you to set an SIP when investing for the first time. The first investment will always equal the minimum investment amount which is around ~17-20k based on stock prices. Subsequent SIP investments allow you to invest just Rs 6000. These regular investments allow our investors to take advantage of all the benefits mentioned above!
How does an SIP work for the Teji Mandi Portfolio
When building the Teji Mandi portfolio we assign each stock a certain weight. This weight becomes the stock’s ‘ideal composition’ in the portfolio.
With time, as prices change, each stock’s weight in the portfolio will also start changing. Our system compares each stock with its ideal weightage in the portfolio to find the stock weights that have changed the most.
The SIP amount is first invested in stocks where the weightage might have reduced. With every instalment, the system ensures your stocks try to match their initial weights in the long run.
Maintain a disciplined investing habit through an SIP will also help you reach the ideal composition for your portfolio in the long-term.