Overcome the Risks of Volatility with Stock SIP

In this article, we will discuss

Discover Opportunity in Volatile Markets through Stock SIP

Investors often look for different methods to generate and build their wealth. Over the years, SIP has gained wide popularity and is constantly attracting new investors. If you are not aware, you can now make SIP investments in not just mutual funds but also the stock market through stock SIP plans. In this blog, we’ll cover its basics to help you determine if it is a good investment choice for you. Keep reading!

What is Stock SIP?

For those who are unaware, SIP stands for Systematic Investment Plans. Just like mutual funds, Stock SIP is also a stock market instrument that allows you to make systematic investments in equity stocks. You can pick an equity share of your choice and fix an amount or quantity to invest on a systematic basis. The investment plan could be monthly or even quarterly, depending on your convenience. This gives you the flexibility to spread your investment capital across a period of time. Hence, instead of having to make a lump sum payment at one go, you can invest in the equity market through smaller investment sizes periodically.

Types of Stock SIP

To be able to start this investment plan, you first need to know there are two types of SIP in the equity market, i.e. amount-based SIP and quantity-based SIP. Irrespective of what platform you choose, you will be asked to make a choice.

  • Amount-based stock SIP

First of all, you have to start by choosing a stock you want to invest in. Once you have decided on the stock, you will have to choose the total amount you want to invest through your systematic investment plan. Now, depending on the amount you have decided and the value of the stock at that time, the stockbroker will credit the number of stocks in your demat account and debit the money equivalent to its value. For example, let’s say you chose a stock trading at ₹155 with an investment amount of ₹1,000 for your SIP. Since there is no provision for fractional shares here, the broker will credit the highest quantity of shares you can get with the selected amount. Hence, in this case, you will get only 6 shares (1000/155 = 6.45). As you can see, there is a fractional value of 0.45 left. The broker will ignore this amount and credit the highest value of full shares your specified amount can buy. Additionally, remember that most stockbrokers have a minimum amount set for Stock SIP; hence, you will have to choose an amount equal to or higher than that price.

  • Quantity-based stock SIPs

If you choose the quantity-based option, the broker will credit the said quantity of shares on the set date in your demat account. In this case, depending upon the prevailing market price, an equivalent amount shall be deducted from your demat account. Suppose you choose the same share from above, and it is trading at ₹155 on the due date. You have placed a request for 10 shares; hence, the broker will deduct ₹155*10 = ₹1,550 from your available balance and credit 10 shares to your demat account However, in case you don’t have sufficient balance in your demat account, your order can also get rejected. Therefore, in order to avoid rejection, make sure to set up a manadate with your stock broker.

How Does Stock SIP Mitigate the Risk of Volatility?

Stock SIP plans work on the simple concept of rupee cost averaging. It is a crucial aspect of any scheme where you need to make payments in fixed instalments at regular intervals. In SIP investments, the price of the scrip plays a crucial role in the entire process. In case of amount-based SIP, when the prevailing price is high, you get less number of shares, and when the prevailing price is low, the number of shares is high. Whereas in case of quantity-based SIP, if the price is high, you pay more and vice versa. This averaging method spreads your cost as well as the risk involved across your entire investment tenure. This prevents your portfolio from getting exposed to any extreme or sudden price volatility in the market. Take a look at the table for a better understanding.

Month Quantity of Shares Share Price Total Amount (₹)
June 100 100 10,000
July 90 110 9,900
August 99 101 9,999
September 105 95 9,975
October 96 104 9,984
Total no. of shares = 490 Total amount invested = ₹49,858 Average price per share = ₹101.75 Now, if we asusme the current market price of the share is ₹110 per share, your average cost of investment is still ₹101.75. Hence, you are still at a point of positive return, irrespective of the price fluctuations in the market. This is how stock SIP mitigates the risk arising out of price volatility while allowing you to increase your returns.


Stock SIP is a disciplined method of investment that allows you to build your corpus without constantly having to monitor the markets for the right stock and the right opportunity. You can always take the help of a stock SIP calculator to find an estimated as well as historical returns before investing. With the New-Gen Samco Trading app, you can meet your financial goals by approaching the stock market the right way. It is a robust trading platform that not only provides a meticulous trading and investment floor but also helps you Ace the Index.

Frequently Asked Questions?

Q1. Can I stop stock SIP? 

Ans. Yes, you can contact your broker or raise a request for the same on the broker’s website or app.

Q2. Do I need to log in to my demat account to buy shares on the SIP date?

Ans. Once you place the SIP request with your broker, they will automatically execute the order on your behalf at every SIP date. But remember to place a mandate as you set your sip so that the order can execute smoothly. Because if your demat account doesn't have sufficient funds then your sip will keep on rejecting.

Q3. Can beginners invest in stock SIP?

Ans. Anyone can invest in stock SIP. However, you need the skills to pick the right stock so that this investment turns out to be profitable for you.

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