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What is SIP Investments in Mutual Fund-[Benefits,Risks,Features]-Steps to Investment

SIP Investment


What is SIP Investment in Mutual Fund?


You Must Hear about Sip but are you confused about what it really means and how you start it here’s a Quick snapshot to help you to jump-start your SIP Investments journey.

What is SIP (Systematic Investments Plan)


SIP or Systematic Investments plans are a financial product where you invest a fixed amount on a monthly or quarterly basis on the mutual fund of your choices.

Whenever you start your SIP you can do it for fix duration or you can start a perpetual SIP.

In Perpetual SIP you can later decide when you want to stop SIP it when we talking about SIP we are saying that we will invest a long term goal.

Which are more than five years like children's higher education or retirement plan etc?

A systematic investments plan or SIP is a smart and hassles free tool for investing in mutual funds.

It is similar to a recurring deposit where you save a fixed amount regularly for a period of time.

 The difference is that with SIP you invest a fixed amount regularly in mutual fund schemes these have the potential to beat inflation and create wealth for you in the long run.

Systematic investments plan or sip is offered by the mutual fund as an alternative to the recurring deposit of the bank so what you do.

You take out a sum the fixed amount of money every month and put it into your favorite mutual fund and you see your money grow that is the simplest understanding of a SIP.


You can invest in SIP according to your Financial Needs.

Types of SIP Investments

Sip investments provide you four types of SIP Duration in which you can invest SIP according to your needs and time.

Weekly: - you can invest on a weekly basis and invest your SIP per week.

Monthly: - you can invest on the Monthly basis and invest your SIP per month.

Quarterly: - you can invest on the Quarterly basis means every three months you invest your SIP in Mutual Fund.

Features of SIP Investments in Mutual Funds Investments


Discipline approach

One of the amazing features of SIP investments is that you can choose an amount of money you want to invest which can be as low 500 rupees even 100 rupees per month.

Here in this video, I invest my first Mutual Fund investments by suing SIP through the Groww app with a small number of 200Rs per month.




The amount you choose to invest will be automatically deducted from your bank account theoretically and will help you to build financial discipline.

So now you can spend your money as your wish without feeling guilty about not saving.

No need to time the market

The market can be a roller-coaster ride where it crashes and so high without a volume which leaves the investment feeling giddy with the SIP.

You don’t have to worry about any of the ups and downs because you will be investing in regardless of the nature of the market.

Over a span of time it wouldn’t affect your profitability.

Rupee cost averaging


Now, this brings us to another great feature of SIP (Systematic Investments Plan).

As mentioned before your investments would be consistent irrespective of the natural market when the market is low you will get more stock and when it is high you will get fewer.

Over a period of time the cost of a stock will average out will receive an awesome profit despite a volatile market.

Power of Compounding

The beauty of investing in s toll-like SIP is that the profit you make every month is compounded.

 So simply put if you invest 100Rs in the First month and you earn an interest of 10% on it the amount you get 100Rs and in the next month.

In the next month, the amount could be calculated on the addition of previous 110Rs and current 100Rs which makes it 210Rs and you will get 231Rs.

Affordability

It’s a myth that investments are luxury for the rich with investments option of as low as rupee 500 per month.

You can offer SIP without worrying about any financial stream now you can even choose to discontinue a plan at any time without any publications of the fixed lock-in period.

Convenience

The vast reach and endless possibilities of SIP make it unique for everyone you have complete control of your future variables such as how much to invest where to invest and duration are all decided by the look at your financial needs limitations and your goals.

Tax-saving

If you still find investing in SIP is not very lucrative then it has another outstanding from which every taxpayer will love if you choose SIP in the ELSS scheme then it is an application for tax saving under section U/s 80C of the income tax act.

So now you are not only making money by investing but you can also reduce your tax liability.

Benefits of SIP Investments in Mutual Funds


Discipline

First and formest the benefit is that disciplines you it process you to kind of save regularity it builds wealth over a period of time.

Achieve your Financial Goals

The second benefit that it helps to achieve your financial goals.

Reasons for SIP Investment

Create wealth for you in the long run, you should invest through SIP (Systematic Investment plan).

Start Small

You don’t need to wait till you have a large amount to invest so SIP you can start with an amount as small as even 100Rs.

I have invested my investments in the mutual fund using a SIP of 200Rs per month.

You get flexibility

SIP gives you the flexibility to choose the amount you want to invest in the frequency of investments the scheme you want to SIP continues you can invest either daily, monthly, quarterly on your choice of mutual funds, based on your preference.

Not worry about Market

With SIP Invest regularly in mutual fund schemes irrespectively of market ups and downs as a result in the cost of purchase is averaged over a period of time and you don’t need to worry about the timing of the market.

Very convenient

It is very convenient investing through SIP. It is very convenient the amount you choose is auto-debit from your bank account as the pre-decided frequency so you don’t need to worry about how to invest every month which helps you instill financial discipline.

Steps to Invest in SIP in mutual Funds


KYC(Know your customers) Done

To start a SIP you first, need to get your KYC done you can either speak a financial advisor walk into an investor service center contact register and transfer agent by cams a curvy or visit any of the online platforms.

You need to follow documents with your ID proof, address proof with support sigh, and canceled check this gets your mutual fund ready.

Select a suitable scheme

You can select schemes that suit your investment objectives and risk profile.

Decide the amount, frequency & Time period

You just need to decide on the amount of frequency and time period of investments.

Start your First SIP Investments in Mutual Fund

Finally, you can start and stop your SIP any time were in a fixed deposit amount, as decided by you is invested in the fund of your choice from your bank account and yes you can also, stop SIP anytime you know the there is no penalty to charges to stop SIP.

In the long run, SIP investments can help you full fill the big dream of your life by starting a small amount.

Risks of SIP Investments in Mutual Fund


Diversified Equity Mutual Fund

If you take as SIP of a diversified equity fund then we have discussed earlier in several that diversification is a double-edged sword.

The moment you start diversifying your risk you also end up diversifying your return takes.

Work only with Volatile Market

If we are talking about a volatile market then SIP makes is under is going a bull run what happens is that every next installment of your SIP is more expensive than the previous one.

SIP will not work with big Investments

If you have the lump sum amount to invest and if you are still opting for the SIP route what happens is that the balance part of your lump sum amount money lies idle and generates nothing.

NAV in SIP Investments

NVA stands for Net Asset Value is a term of mutual. The NAV (Net Asset Value) is calculated by the total cost of shares divided by one unit of shares.

Example:-
The total cost of shares/One unit of shares
1000/10=100
The 100 will be NAV or Net Asset Value

How to invest in SIP Directly



Many people are not comfortable with online investments and they think like it’s a fraud and scam. So those can invest directly through mutual fund houses.

They just search the nearby mutual fund house and there will be a broker who guides them to invest in the mutual fund.

But there is a minus point to invest in SIP directly that is the broker takes some charges to guide about the mutual which is high charge comparatively online brokerage.

How to invest in SIP Online



If you found it difficult to invest in SIP mutual fund locally and there are no mutual fund houses or branches near to you. So there is one more way for SIP Investments.

You can invest in SIP Online. There are many platforms are available online to invest in SIP mutual fund and you can invest through these platforms very easily.

Most of the popular banks are providing online service to invest in a mutual fund like HDFC mutual fund, ICICI prudential mutual you can find Kotak Mahindra mutual fund and more you can find it easily and start investing.

Google Recommended FAQ’s


What are the 3 types of mutual funds?

The 3 types of Mutual Fund

Weekly

Monthly

Quarterly (3 months)


Is SIP is tax-free?

If you think that SIP is a tax-free investment so you are SIP is nor tax-free investments but it’s a tax-saving investment.

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