Systematic approach to investments:

• Are you saving something from your regular income?
• If you are saving, is it getting added to your investment corpus?
• If you are creating a corpus, are you getting above inflation return on it?
Systematic approach towards investments is the best way to save, accumulate and create wealth for your future. Two such strategies are Systematic Investment Plan (SIP) and Systematic Transfer Plan (SIP). In SIP, a fixed amount is invested in a particular scheme at periodic intervals. SIP is a very good strategy for salaried people, or those who receive a periodic inflow of cash.

Advantages of SIP:

• Saving and wealth accumulation
• Inculcates disciplined habit of investing
• Entry at various market levels (averages out the possible risk associated with the equity market)
• Hassle-free mechanism (one-time arrangement – instructions are given at the time of initial transaction)
• Power of Compounding
• Investments synchronised with your cash inflows/salary
If you have a lumpsum amount, but do not want to expose the entire amount to equity at one go, you can make an arrangement where some amount gets transferred to an equity scheme from a debt scheme periodically. This system is known as Systematic Transfer Plan.

Advantages of STP:

• Saving and wealth accumulation
• Entry at various market levels (averages out the possible risk associated with the equity market)
• Hassle free mechanism (one time arrangement – instructions are given at the time of initial transaction)
• Power of Compounding
• Lumpsum amount not sitting idle (you are getting better-than-bank return on the initial amount)
Depending upon your need, cash flow structure and investment approach, you can choose either SIP or STP and achieve your financial goals.