One of the most recommended approaches to wealth creation is to invest smaller amounts in growth oriented investment products periodically. One can make investment in stocks with the help of systematic stock investment tools provided by brokers. With these tools one can invest in an identified set of companies or themes or type of companies like mid-, small- or large-cap.
Prerequisites
For investing in shares one needs to open a demat account and for trading (buy/sell) the shares on the exchange using the broker’s platform, it is necessary to open a trading account with the broker. Bank account of the investor must be linked to the demat and trading account of the investor.
Approaches
Investors can login to the trading platform of the broker and register for stock SIP by:
- Creating a bucket of 10-15 stocks and investing periodically.
- Investing a particular amount proportionately in pre-defined stocks adhering to a theme.
However, the investor has an option to not select a particular stock.
The investor can either specify the amount to be invested in each stock or can specify the number of shares he wishes to purchase in each instalment.
Process to create stock SIP
The investor needs to specify the investment amount, start date, end date and trigger date for the stock SIP. Trigger date is the date on which investment shall be made in the bucket for each instalment. On the trigger date, a separate order shall be generated for each scrip selected by the investor. The orders are then executed as per the order matching system of the exchange brokers. Investors can choose the frequency of the SIP —daily, weekly, fortnightly or monthly.
Points to note
- It is important to check the charges levied by the broker to create stock SIP requests apart from regular charges such as brokerage, and other related charges.
- The stock SIP instruction can be cancelled or modified at any time by the investor and this takes effect from the next trigger date.
(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
