Home Learn What is SIP in Stocks? Understand Systematic Investment Plans for Shares

What is SIP in Stocks? Understand Systematic Investment Plans for Shares

What is SIP in Stocks? Understand Systematic Investment Plans for Shares
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Do you know that you can invest your money in the stock market and potentially earn more than you would with a regular savings account? One way to do this is through a Systematic Investment Plan (SIP).

SIP is a method of investing in mutual funds where you make regular contributions at fixed intervals, usually monthly. It allows you to invest small amounts of money in the market over a longer period of time, rather than investing a lump sum at once. The amount invested through SIP can be as low as ₹500 per month.

Thus, if you’re looking to grow your money long term, then this article is for you. Let’s begin.

What is SIP in Share Market?

SIP stands for Systematic Investment Plan in stocks is a type of investment strategy where an investor invests a fixed amount of money at regular intervals in the stock market. This is done through a Systematic Investment Plan (SIP) in shares, which is similar to a SIP in mutual funds. It allows you to invest small amounts of money regularly in the SIP in stock market, instead of investing a lump sum at once.

How to do SIP in Shares? 

SIP in stocks works by allowing investors to invest a fixed amount of money at regular intervals, such as monthly or quarterly. The amount invested is used to purchase shares of different companies listed on the stock market. Over time, as the share prices of these companies fluctuate, the value of the investor’s portfolio will also fluctuate.

SIP in stocks is a long-term investment strategy that requires patience and discipline. By investing regularly, investors can take advantage of the power of compounding and potentially earn higher returns over the long term. It also helps in reducing the risk of investing a large sum of money at once, as the investment is spread out over a longer period of time.

What are the Best Stocks for SIP? 

Let’s have a look at some of the best SIP stocks to buy long term in 2023.

S. No. Long Term Stocks IndiaIndustry
1. Reliance IndustriesMultinational Conglomerate
2. Tata Consultancy Services (TCS)IT Services & Consulting
3. HDFC BankBanking
4. Hindustan Unilever FMCG-Household Products
5. InfosysIT Services & Consulting

Popular SIP Stock List

  • Reliance Industries: Reliance Industries is a conglomerate with diverse interests in energy, petrochemicals, textiles, retail, and telecommunications. 
  • Tata Consultancy Services (TCS): TCS is a leading global IT services, consulting, and business solutions organization.
  • HDFC Bank: HDFC Bank is a leading private sector bank in India known for its customer-centric approach and innovative financial products. 
  • Hindustan Unilever: Hindustan Unilever is a consumer goods company that offers a wide range of products such as personal care, home care, and food and beverages
  • Infosys: Infosys is a global leader in next-generation digital services and consulting.

How SIP Helps in Rupee Cost Averaging? 

SIP in stocks is an investment strategy that allows you to invest a fixed amount of money at regular intervals in the stock market. One of the main benefits of SIP in stocks is that it helps in rupee cost averaging.

Rupee cost averaging is a technique used to reduce the impact of market volatility on your portfolio. It involves investing a fixed amount of money at regular intervals, regardless of the market conditions. 

SIP in stocks helps in rupee cost averaging by allowing  you to invest a fixed amount of money at regular intervals, such as monthly or quarterly, over a long period of time. By investing a fixed amount at regular intervals, you are able to purchase more shares when the prices are low and fewer shares when the prices are high. Over time, this can help in reducing the average cost of acquiring shares in a portfolio.

Overall, SIP in stocks is a popular investment in equities strategy for those who want to invest in the stock market but do not have a large sum of money to invest upfront. It helps in rupee cost averaging and potentially generates higher returns over the long term.

Why Invest in Stocks Through SIP? 

  • Long-Term Benefits of Stock Investment: Investing in the SIP share market investments through SIP setup can provide long-term benefits. Historically, stocks have provided higher returns compared to other investment options such as fixed deposits and bonds. However, stock market investments are subject to market volatility, and it is difficult to predict short-term market movements. By investing through SIP stock market, you can take advantage of the power of compounding and potentially earn higher returns over the long term.
  • SIP as a Disciplined Approach to Stock Investment: SIP on stocks is a disciplined approach to stock market investment. By investing a fixed amount of money at regular intervals, you can develop a habit of regular saving and investing. This helps inculcate a disciplined approach towards investing, which can lead to better investment decisions in the long run. 
  • Potential returns from stock investment through SIP: Investing in stocks through SIP in equity can potentially provide higher returns compared to other investment options. However, it is important to note that SIP in stock market investments are subject to market risks and there is no guarantee of returns. The returns on SIP in stocks depend on various factors such as market conditions, the performance of the company whose shares purchase are being invested in, and other macroeconomic factors.

How to Invest in Stocks through SIP? 

Let’s learn how you can invest in stocks via SIP Systematic Investment Plan. However, for you to invest in SIP stocks, a demat account is required. 

  • Choosing the right stocks for SIP in Share Market: You should look for companies that have a strong business model, a competitive advantage, and a history of consistent growth. It is also important to diversify the portfolio by investing in stocks of different companies from different sectors.
  • Selecting the Appropriate SIP Plan: After selecting the stocks, you need to select the appropriate SIP plan. You should compare the various plans based on factors such as fees and charges, historical returns, and the investment portfolio.
  • Setting Up a SIP account: After selecting the appropriate SIP plan, you need to set up a SIP account with the mutual fund or brokerage firm. They need to provide their personal details such as name, address, and PAN number, and complete the KYC process. Once the KYC process is completed, you can open a SIP account.
  • Making SIP Investments: Once the SIP account is set up, you can start making SIP investments. Select the stocks by adding the amount you want to invest in each stock. The SIP investments are automatically deducted from the bank account at regular intervals as per the selected SIP plan. 

Who Should Invest in Stock SIPs?

Investing in stock SIPs is suitable for individuals who are looking to invest in the stock market but may not have the expertise or time to invest directly in stocks. SIP in stocks or best equity SIP is also suitable for individuals who are looking for a disciplined approach towards investing and want to benefit from the long-term potential of the stock market. Additionally, stock SIP means in returns is suitable for you who are willing to take moderate risks and have a long-term investment horizon of at least 5-7 years.

Difference Between Stock SIPs and Mutual Fund SIPs

Here is a brief comparative analysis of the process of availing a SIP in Stocks vs a SIP in Mutual Funds:

Criteria of DifferencesSIP in Mutual FundsSIP in Stocks
PurposeUseful for basket investing in mutual funds.Useful for investing in stocks.
Target AudienceSuitable for retail investors or first-time investors in the equity market.Suitable for seasoned stock equity investors, enabling active management.
DiversificationProvides the benefit of diversification.Offers limited diversification to your portfolio.
Risk LevelInvolves moderately less risk.Involves moderately higher risk.
ManagementInvestment is managed by experienced fund managers.Requires making investment decisions and determining entry/exit points for each stock.
Rupee Cost AveragingRealizes the benefit of rupee cost averaging.Realizes the benefit only if you invest at the right time.

Consider smallcase to Begin Your SIP in Stocks Journey… 

If you are considering investing in stocks through SIP trading, smallcase can be a good platform to begin your journey. Why? 

smallcase is a platform that enables portfolio investing, allowing you to invest in shares or a group of stocks that have been selected based on a specific theme or strategy. With smallcase, you can start SIP in stocks and benefits of stocks SIP from the long-term potential of the stock market while minimizing your risk.

Smallcase offers a variety of smallcases to choose from, each with a different investment theme or strategy, such as high dividend yield, long-term growth, and low volatility. By choosing the right smallcase, you can invest in stocks that align with your investment objectives and risk profile.

Additionally, smallcase allows you to invest in smallcase SIP in equity shares with as little as ₹500, making it accessible for investors with different budgets. Furthermore, the platform is user-friendly, and you can monitor your investments and track your performance easily.

Overall, smallcase can be a suitable platform for individuals looking to start their SIP in smallcase, in stocks journey. However, it’s important to do your research and understand the risks associated with investing in the stock market before making any investment decisions.

To Wrap It Up…

In conclusion, investing in stocks through SIP is a disciplined and effective approach towards wealth creation. It offers the potential for long-term growth and helps you to achieve financial goals. SIP in stocks can be a good option for those who are new to investing in the share market or want to diversify their investment portfolio. smallcase offers a convenient and user-friendly platform for you to start investing in SIPs in stocks. 
So, if you want to start investing in equities through SIP, smallcase can be a great platform to begin your journey. With proper research, analysis, and a disciplined approach, SIPs in smallcase can potentially help you achieve your financial goals.

FAQs

1. Is SIP better or buying stocks?

SIP in stocks is better than buying stocks for beginners because it is a more disciplined way to invest. SIP allows you to invest a fixed amount of money at regular intervals reducing risks. However, if you’re an experienced investor who can handle risks, then buying sip in stock market is great.

2. What is the minimum amount I need to start a SIP?

The minimum amount you need to start a SIP is ₹500 in most cases. However, at smallcase you can start investing at just ₹294.

3. When to Invest in SIP in stocks?

There’s no perfect time to start; you may as well begin investing today, free from concerns about market fluctuations.

4. What is stock SIP?

SIP, short for Systematic Investment Plan is a strategy that invests a fixed amount of money at regular intervals, be it daily, weekly, fortnightly, or monthly, depending on the investor’s capacity.

5. Is SIP profitable?

You may earn money with SIPs through compounding. You can start by investing small amounts for extended periods to achieve substantial returns. Regular, small investments can help you accumulate a significant fund, allowing you to reach long-term financial goals.

All You Need to Know About Starting Your Share Market Journey

Share market investments can seem a bit tedious at first but smallcase is here to simplify all your queries and worries. Right from “Share market for beginner”, “Portfolio Diversification” to “short term investments” we’ve got all the tips, just a single click away –