How direct equity SIPs work

When you open an online trading account through angel brokers, you have an option of investing systematically in preferred equity shares. This option is known as the systematic investment plan (SIP) or popularly known as goal based investing.

Using SIP as the mode of investing, investors need to set a specified amount of investment or the number of equity shares he wants to invest on a monthly basis. You need to specify the date of the month on which your investments should be made.

Let’s take an example, you (investor) request the funding house to buy out 100 shares or you choose an amount of say Rs 5000 in your preferred equity shares on the tenth of every month over the period of 12 months. You can choose your amount, the number of shares you want to buy, preferred dates of and the term of the investment.

The order quantity or the amount specified will be automatically deducted from your account at the current market price on your preferred date of investment. So, your 100 shares or Rs 5000 will be allotted to a set of equity shares on every tenth of the month over the period of one year.

When you choose to invest in equity shares through systematic investment plans, you are actually accumulating the shares of a particular company(s). You need to place an order for buying these shares in advance. Your money will be deducted only after the order is executed by the funding house.

Source: economic times &

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