Arthgyaan

Supporting everyone's personal finance journey

What is a stock SIP? Should you have one?

This article explains the concept of the stock SIP that allows you to buy shares automatically on a regular basis.

What is a stock SIP? Should you have one?


Posted on 22 Nov 2023
Author: Sayan Sircar
Tags: Tags Portfolio Construction
3 mins read
šŸ“¢Join 2300+ readers on WhatsApp and get new post notifications!

This article explains the concept of the stock SIP that allows you to buy shares automatically on a regular basis.

What is a stock SIP? Should you have one?

šŸ“š Topics covered:

What is a stock SIP?

SIP SWP and STP

All of these are standing instructions that get executed as per a schedule you specify:

  • Systematic Investment Plan (SIP): Money from a bank account is invested into a mutual fund, typically once a month
  • Systematic Transfer Plan (SIP): Units from a mutual fund are redeemed to invest in another mutual fund of the same AMC
  • Systematic Withdrawal Plan (SWP): This is the reverse of the SIP. You sell the units from a mutual fund to send money to a bank account

Note: You donā€™t invest in a SIP; you invest via one since a SIP is a standing instruction. You invest in a mutual fund, or basket of stocks, via a SIP.

In the image above, you can replace the mutual fund with a single or a basket of stocks that you choose and that will become a stock SIP.

What are the benefits of having a stock SIP?

A stock SIP gives the same benefits of a SIP in Mutual funds i.e. regular automated investment that ties in with the frequency of your income from salary. Unlike the usual sporadic investment pattern of stock investing, the concept of the stock SIP brings in discipline and regularity to direct equity investments.

A stock SIP should be used whenever you are accumulating a position in a core basket of stocks over time. For example, you are a direct equity investor who has a wish list of 10 ā€œcoreā€ stocks to accumulate over time, a stock SIP can be useful here.

If you are buying ETFs for long-term goals, like those tracking Nifty or Gold, then also a stock SIP will act just like a regular mutual fund SIP and serve the same purpose.

Did you know that we have a private Facebook group which you can join for free and ask your own questions? Please click the button below to join.


Consultation with Arthgyaan

Which brokers have a stock SIP?

Most major brokers in India have the stock SIP functionality. A simple Google search of ā€œbroker name stock SIPā€ will give you all details. Here is a tutorial from Zerodhaā€™s website:

Setting up a stock SIP

Image Ā©: Zerodha.com - https://support.zerodha.com/category/trading-and-markets/kite-web-and-mobile/articles/kite-sip-order

The broker website will also have detailed FAQs on this topic.

How does a stock SIP work?

A stock SIP is a standing instruction to purchase stocks on a regular basis. These purchases are of two types:

  • a fixed number of stocks per transaction: here you specify how many shares you want like 10 shares of Infosys. The money deducted from your bank account will vary every time due to changes in the stock price
  • a fixed amount of money invested per transaction: here you specify how much you wish to invest say ā‚¹10,000/month in Infosys. Since shares can only be purchased in integer numbers, the highest number of shares that can be purchased with the amount will be placed as an order.

What's next? You can join the Arthgyaan WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

To understand how this article can help you:

If you have a comment or question about this article

The following button will open a form with the link of this page populated for context:

If you liked this article, please leave us a rating

The following button will take you to Trustpilot:

Discover an article from the archives

Worked out case studies for goal-based investing

Previous and next articles:

<p>This article lists the historical Cost Inflation Index (CII) values since 1981 which are to be used for capital gains tax calculation for assets purchased before 2001.</p>
Market Data Tax
What are the historical Cost Inflation Index (CII) values since 1981?

This article lists the historical Cost Inflation Index (CII) values since 1981 which are to be used for capital gains tax calculation for assets purchased before 2001.

Published: 21 November 2023

8 MIN READ

<p>This article gives you a list of common questions and their answers on the concept of tax collected at source when you buy a car.</p>
Tax FAQ
Frequently asked questions (FAQs) on Tax Collected at Source (TCS) when you buy a car

This article gives you a list of common questions and their answers on the concept of tax collected at source when you buy a car.

Published: 26 November 2023

1 MIN READ

Latest articles:

<p>This article shows how quickly you can pay off your home loan, and even save a lot of interest, by increasing your EMI steadily year-on-year.</p>
House Purchase Loans
How much time and interest do you save if you pay off your home loan using a step-up EMI?

This article shows how quickly you can pay off your home loan, and even save a lot of interest, by increasing your EMI steadily year-on-year.

Published: 1 May 2024

4 MIN READ

<p>This article explores the probabilities of gold price movement, both up and down, from current price levels.</p>
Gold Market Movements
Gold touched ā‚¹75,000 per 10 gm. Should you buy gold or sell gold at this point?

This article explores the probabilities of gold price movement, both up and down, from current price levels.

Published: 28 April 2024

3 MIN READ

Topics you will like:

Asset Allocation (21) Basics (8) Behaviour (12) Budgeting (12) Calculator (25) Case Study (6) Children (17) Choosing Investments (40) FAQ (12) FIRE (13) Gold (22) Health Insurance (5) House Purchase (30) Insurance (16) International Investing (12) Life Stages (2) Loans (18) Market Data (7) Market Movements (17) Mutual Funds (46) NPS (7) NRI (19) News (18) Pension (8) Portfolio Construction (53) Portfolio Review (27) Reader Questions (8) Real Estate (7) Research (5) Retirement (38) Review (15) Risk (6) Safe Withdrawal Rate (5) Set Goals (28) Step by step (15) Tax (59)

Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself.

Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.

Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.

More posts...

Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.

This post titled What is a stock SIP? Should you have one? first appeared on 22 Nov 2023 at https://arthgyaan.com


We are currently at 396 posts and growing fast. Search this site:
Copyright Ā© 2021-2024 Arthgyaan.com. All rights reserved.