SIP in stock market is a type of long term investment. People who are looking for long term investment should try sip. SIP full form is a systematic investment plan.
In this blog i am sharing how to open a sip in the share market without any broker which will save your brokerage fees.
What is sip in stock market and how it works
A systematic investment plan is well known as SIP in the stock market. It is a type of long term investment plan which is done for a minimum 3 years. It can be done with less amount of Rs 500 per month as well. It is not worth it when done for a short period of 6 to 12 months or below 3 years.
The reason why it is worth it for a long period is compound interest. Yes, SIP gives benefits due to compound interest. If SIP is done for a short period then there will be hardly any compound interest or very low compound interest resulting in less or no profit margins.
It is old debate is stock market investment dangerous, answer is still not 100 % clear. Intraday trading is the riskiest and sip is much safer then intraday.
If you have purchased some shares in sip for 3 years at the price of Rs 55 and Rs 75. After 3 years the price increases from Rs 55 to Rs 75 and Rs 75 share price to Rs 100. You will get not only the benefit of increasing the share prices but also interest on them. You will get not only one interest in fact there will be interest on interest which is called compound interest. Therefore investing for more years results in more compounding.
Share price scores from Rs 55 to Rs 75 in the first year then apart from price profit interest rate will be added as a profit. Suppose you got 10 to 12 % interest in the first year, next year you will not only get 10 to 12 % interest but some interest on 10 to 12 % interest which increases the long term profit and creates wealth.
How to invest in SIP
Follow some basic steps to invest in.
Complete KYC
To complete kyc the following documents are needed.
Documents
- ID card.
- Pan card.
- Address proof.
- Bank account.
- Mobile number linked pan and aadhar card.
It is necessary to have all the above given documents to open a sip account. Before applying for a sip demat account it is compulsory to have pan card, id card, address proof, bank account.
Open demat account
To start investing in a systematic investment plan (SIP) first open a demat account. No need to approach brokers for opening an account. Accounts can be open online. Documents including ID card, PAN card, address proof, bank account, mobile number are required to open a share market account.
Demat account brokerage firm name
Zarodha, upstock, sharekhan are some demat accounts or brokerage firms where you can open an account online or offline.
Register for SIP
After opening the demat account register sip. SIP is not enabled by default instead one has to activate it after opening an account.
Calculate risk
Research about the company and its upcoming projects before buying shares. Invest the money as per your risk taking ability.
Calculate amount
Good thing about SIP is it can be started with a minimum Rs 500 as well and students can also invest in it.
Research about shares
Before investing in stock market research about shares. Research work is very important before investing money in the share market. Don’t get trapped in penny stocks.
SIP algorithm
It is said that best performing shares are kept for a long term and worst performing shares are automatically kicked out from the portfolio.
Conclusion – Simple investment plan, its benefit and minimum amount to start sip is explained. Documents required and brokerage firm names such as sharekhan, zarodha etc shared. How compound interest increases the profit every year is explained.