In this article, we will discuss
- Discover Opportunity in Volatile Markets through Stock SIP
- What is Stock SIP?
- Types of Stock SIP
- How Does Stock SIP Mitigate the Risk of Volatility?
- Frequently Asked Questions?
Discover Opportunity in Volatile Markets through Stock SIPInvestors 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 SIPTo 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
Quantity-based stock SIPs
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 (₹)|