SIP Systematic Investment Plan and what is Mutual Fund
Systematic Investment Plan: Almost every citizen of India well aware of the importance of investment. In this modern world, investing your hard-earned money wisely is essential to achieve your financial goal. All your long-term financial dreams can be made only if you manage to spend your money wisely, to be frank; expanding your wealth concerning investment will yield you better profit.
There are several modes of investment options that are in practice. But investing in mutual funds is the most commonly preferred one by many citizens of India.
What is a mutual fund?
In simple words, it’s a market pool where investors from any part of the world can purchase their shares. Not only share, but it’s also securities or both by spending their hard-earned money. However, the investment done by the investors are subjected to the risk of market fluctuations. They can enjoy high profits, and as well as they need to accept the losses if any unfortunate things happen.
However, on analyzing the recent flow of the market values, the way of investing money over mutual funds needs to be regulated with the aid of a Systematic Investment Plan shortly known as SIP.
What is the SIP (Systematic Investment Plan)?
SIP can be defined as the platform, which makes things more comfortable for the investors to invest in mutual funds. In simple words, it briefs as the SIP offers investors a wide variety of options over mutual funds investments.
In general, the investments on mutual funds are carried by the lump sum amount, which often leads to the involvement of market risk. However, with the available SIP, now investors can able to invests their money in a regular mode. Or can be termed as the periodic gap of the time interval.
The operations carried under the SIP mode are somehow similar to the depositing your money into the recurring deposit (RD) bank account in a fixed time interval. However, in this case, the money gets invested in mutual funds, which involve a little bit of market risk factor when compared with the bank deposits.
How does SIP work?
SIP is one of the most natural methods of investment plans existing in the market. Also, being flexible, people often prefer to SIP for investing their hard-earned money in mutual funds. Under this SIP, your investing payment will be debited directly from your bank account. Then the same credit into the chosen mutual fund scheme on monthly or any other specific period gap.
Based on your investment and also on considering the current ongoing market value of the markets, a certain number of units to you on the same day itself.
Why do you need to SIP?
Well, SIP regulates the mode of your investment on the mutual funds. It helps you to keep away from the stress factor instead of worrying about the market status. Scenarios like getting confusion on placement over the current market conditions will be avoided by using the SIP mode of investment on mutual funds.
By keeping those stress factors away from you, the SIP will keep investing your hard-earned money over the specific chosen complementary scheme on behalf of you. And that too without your part while transferring your money and getting those units from the market.
SIP allows you to plan your investment and boost your habit of savings for your future life. With the aid of SIP (Systematic Investment Plan), you can able to invest for an extended period. By doing so, you can able to avail a high amount of a return.
Benefits of Investing via SIP
When compared with all modes of investments, investing in mutual funds yields you a better return, mainly investment carried out by through SIP mode. Here are the lists of highlighting benefits one can avail by investing in mutual funds by through SIP
Power of Compounding: If you opt to spend your money through SIP mode, you can able to avail of the benefits of compounding your investment during the return. Compound interest over your long-term investment will give you great benefits while in performance.
The option of Investing with minimum amount: Investors who are opting for SIP can able to avail of the advantage of investing in mutual funds with small amounts starting from Rs. 500 per month or any other time gap. This gives benefits for investors to plan their long-term investments.
Investors can avail flexibility on their investment:
SIP allows investors to pick the units to purchase volume according to the ongoing market fluctuations. Also, they can choose the time for investment based on the market mood.
Regulates the Investment done by the investors: SIP builds and governs the disciplined habit of investment practice of the investors over their investment on mutual funds.
Auto Debit from Bank accounts: Worried about getting forgotten the investment date, well, this can be avoided with the SIP mode of investment. SIP mode will automatically debit your investment money and sends it to the chose mutual fund scheme without your intervention.
Emergency Fund Releaser: SIP acts as an emergency fund releaser; investors can able to withdraw their investment with just one click. It will be instrumental in the event of an emergency crisis.
How to start SIP?
As the market experts suggest, many investors to invest their money via SIP to avail of better returns. Investors are urging to find the possible ways to spend their cash via SIP. If you are one among the investors, who are seeking the perfect method to start SIP?
STEP 1: If you are the investor, then the first step to start the SIP mode of investment is to gather all your necessary documents. Like PAN, AADHAAR, valid residential proof, recently captured photographs. In addition to that, you will require to have a valid checkbook of your active bank account.
STEP 2: Secondly, you need to choose the best fund houses just like the SBI bluechip, HDFC balanced fund, ICICI Pru Banking & Fin Serv Fund, and so. After that, get the official website details of the chosen fund house and visit the home page where you can find the register option.
STEP 3: Well, since it is mandatory to fill KYC details to start a SIP account in both formats (online and as well as in offline). You need to ready for gathering all those essential KYC details like DOB, Address proof, actual mobile numbers, and mail IDs, and so as for available.
STEP 4: By entering into the register option of the respective portal of the fund house. You will be prompted to enter those essential eKYC details. Along by uploading your soft copy of living proof and PAN card.
STEP 5: After successful entry, as a final step, a video call will be scheduled by the fund house officials to verify your details and physical presence. You can able to skip the video call verification by submitting KYC details with your Aadhaar card; however, by doing you, your investment amount will get limited by Rs. 50k per fund house by the governing authority.
STEP 6: Once all those verification processes are done, you need to enter the essential details like credentials for your online SIP with fund house by entering into the ‘New Investor’ link. Once it was done, you can choose the relevant scheme and the time gap of investment via SIP account from 30 – 40 days at your convenience.
Customization of SIP:
Almost every to fund house will allow their investor to customize their investment via their SIP. You can either chose the monthly, bi-monthly, fortnightly mode of investment upon their interest. In addition to that conventional mode of investment, SIP allows users to customize their SIP amount; this helps investors to adjust their investing money based on the ongoing market mood.
The most crucial point it, investors can avail the option of closing the SIP at any time upon their interest. All they need to do is to provide a written mode of authentication of closure to the respective fund house.
Tax benefits of SIP investment
Since the investment carries via SIP is sold under the ELSS (Equity Linked Savings Scheme). This allows you to invest your money shared with many companies in the market. You can avail of better tax saving options.
When compared with all other modes of investment, ELSS mode will give you the lower lock-in period. Which his three years, however, it is advised to make more prolonged investments to avail better outputs.
Under section 80 C, the SIP investments give you the best tax savings method. The presence of the EEE format in the section 80C allows investors to enjoy the lower tax deduction.
Secrets to achieving more with SIP
Well, who doesn’t like to avail the secret of yield better return from the market via SIP? Here are the few working myths to follow to achieve much more from SIP investments.
- At first, as an investor, you need to note down your financial goal. And workout plan with the SIP investment and fix the amount to invest. Either by monthly/quarterly wise SIP to achieve your business goal.
- Identify the relevant mutual fund schemes that yield you a high return. And also ensure that the program suits well to your requirements. Make sure you make a long-term investment in that scheme to avail the power of computing. And also the rupee-cost averaging benefits of SIP.
- It is advisable to invest your money with multiple SIPs to the different mutual fund schemes. It will ensure a significant amount of return to match your financial goal.
Before engaging with the SIP or with any other mutual fund house or fund scheme. It is essential to read their terms and condition and understand well. So that it gives you an idea about matching or planning your investment plan.