A Systematic Investment Plan (SIP) is a popular mode of investing in mutual funds. It allows investors to put a relatively smaller amount of money in the fund of their choice at predefined periodic intervals, leveraging the benefits of rupee cost averaging. Similarly, you can also invest in stocks via SIPs and mitigate market risks by investing in a planned manner.
A SIP in stocks can be done in two ways – either by fixing the amount of money you wish to invest in the equities or by fixing the number of shares of the stocks you want to add to your portfolio. However, fixing the amount you wish to put in stocks is a wiser way of doing a SIP in equities as it helps you average out your holdings, i.e. buy fewer units of stock when markets are down and more units when they are up.
Furthermore, you can choose to do a stock SIP for a single or a set of different stocks. However, if you wish to benefit from diversification, you should choose a combination of different stocks. It is important to note that the level of flexibility in the case of multiple stocks may differ among brokers. While some may allow you to create your own set of different stocks, some may offer you pre-built baskets of other stocks matching your risk profile and investment style.
Also, different brokerage houses use different names for Stock SIPs.
1. Systematic Equity Plan (SEP)
2. Equity Systematic Investment Plan (Equity SIP or eSIP)
3. Regular Stock Purchase (RSP), or an auto-invest facility.
Just like a mutual fund SIP, you can start a stock SIP with as low as Rs. 100 in India and choose among different investment intervals: daily, weekly, fortnightly, monthly, quarterly, semi-annually or annually.
SIP in Stocks vs SIP in Mutual Funds
Now, you must be thinking about which one is the better option for you – investing in a mutual fund or stocks through a systematic investment plan (SIP). Well, the answer to this depends on the following factors –
|Factors||SIP in Stocks|
|Expertise||Investing in an Stock SIP should be more suitable for you if you are well versed with the markets and can plan your entry and exit in the market along with choosing the right stocks at the right time.|
|Time||More suitable if you can regularly track the markets and dedicate a good amount of time in managing your portfolio holdings.|
|Risk Appetite||More suitable if your risk appetite is high.|
|Factors||SIP in Mutual Funds|
|Expertise||Investing in mutual funds via a SIP is more suitable for you if you lack market expertise of entering/exiting the market or choosing the right stocks as your mutual fund investments are managed by professional fund managers.|
|Time||More suitable if you do not have much time to keep track of the stock market.|
|Risk Appetite||More suitable if your risk appetite is low.|
At Dhan, investing in Stocks via SIP is pretty simple, in just 5 simple steps 🙂
Step 1 – Open a Free Demat Account
Step 2 – Login to the Dhan App
Step 3 – Add Funds
Step 4 – Search & Select you Favourite Stock
Step 5 – Set a daily, weekly or monthly SIP
You can also read about the advantages of investing through Stock SIPs and how SIPs can make you ultra rich.
Happy Investing 💰
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.