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Things To Keep In Mind While Investing In Equity Via SIPs Research Team | Posted On Friday, August 10,2018, 04:58 PM

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Things To Keep In Mind While Investing In Equity Via SIPs




Most people hesitate to invest in the stock market. Even if the stock market does extremely well, investors have mixed reactions. However, it is never too late to start investing in the stock market.

True, stock market is risky. But if you have a sound investment plan and follow it religiously, your investments can reap excellent returns in the long term. People generally shy away from equity because of market volatility. But each day is not the same. Chances are you may lose the opportunity of entering stock markets when conditions are favorable.

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Things To Keep In Mind While Investing In Equity Via SIPs

Experts are of the opinion that equity investments yield good results provided:

  • You invest in a systematic manner
  • You invest with a long-term perspective


Investing in equities for the long-term, negates the impact of medium and short term market volatility on investments. If you invest in line with financial goals, there’s nothing like it!

Practice makes perfect. As a newbie in stock markets, you might not know the right time to make an investment. Why not try equity SIPs?

SIPs or Systematic Investment Plans have been gaining acceptance among mutual fund investors. Similarly, you can also buy or invest in equity shares via SIPs. This service is called ‘Equity SIP’ or ‘Stock-SIP’ or ‘ESIP’.


How does ESIP work?


Investors can buy or invest in shares via equity SIPs, index funds or exchange traded funds (ETFs). Like a mutual fund SIP, you can invest in Equity SIPs at varying frequencies: daily, weekly or monthly. This helps in spreading out investments over a period of time, by which investors can benefit from rupee cost averaging. You will soon have created a sizeable corpus with Equity SIPs.


  • Decide which stocks or group of stocks you’d like to invest in
  • Register for Equity SIP (ESIP) with a broker.
  • Decide the number of shares you’d like to buy and at what frequency. For example, you may register for an ESIP to buy 12 shares of XYZ Co. each month.
  • If you wish to buy shares of multiple companies each month, you have to register for all these shares under the ESIP.


Following are the important points to keep in mind before starting Equity SIPs: 


1. Restriction on stocks:


This facility is broker specific, so each broker will have its own rule book. Some brokers have a restriction on stocks available for investment via Equity SIPs to just the top 100 stocks by market capitalization or stocks appearing in an index like Nifty 50.

The stocks offered under Equity SIPs have a fair amount of volume. Equity SIPs don’t offer illiquid micro-cap stocks.


2. Work out your SIP amount:


Investors start SIPs without a thought on the amount they can afford. Many times investors tend to make an over commitment. They find it hard to continue their SIPs. Investments stop and goals are compromised. Therefore, start small and increase the SIP amount once comfortable. Take calculated decisions.


3. Minimum investment:


There is a minimum amount of money that you need to invest under Equity SIP. This differs from broker to broker.


SEE ALSO: How To Start SIP Investment?


4. Flexibility:


You decide on the number of stocks you intend to buy via Equity SIPs. If stock prices go up:


  • You can either invest additional funds in each installment, or
  • Invest a certain amount in each installment. The broker buys maximum number of shares for the amount you invest each month.


5. Frequency of ESIP:


You can change the frequency of ESIP. You can pause ESIP if you are facing a temporary cash crunch. You can also cancel ESIP. But these facilities are provided only on committing to a minimum number of purchases. This is generally six.


6. Debit mandate:


ESIP requires you to sign a debit mandate in favor of your broker. This allows the broker to deduct the required amount from your bank account.


7. Growth option:


Equity SIPs give you the compounding benefit. You can achieve goals at different stages of life, if you stay invested for the long-term and re-invest your gains. So, opt for the growth option and avoid taking out yearly dividends.


8. Goals:


Always have a goal in mind. Be it buying a brand new car or home, children’s education, retirement planning and so on. Do not invest without a goal.


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