Invest in Mutual Funds through SIP
What is SIP?
SIP or Systematic Investment Plan is a plan through which a person can invest a small amount in a mutual fund at regular intervals (monthly/quarterly).
SIP averages your investment cost over the investment duration and gives the flexibility of choosing your own amount and frequency, making it an ideal investment option for any investor.
Benefits of SIP
- Invest small : SIPs can be started with as little as ₹500 each month. you can choose the frequency as monthly or quarterly for investing. Some Mutual Funds also give the facility of Daily SIP.
- Achieve your goals : Achieve your long-term financial goals as your investments are broken down into smaller, regular investments.
- No need to time the market : SIPs offer freedom from being on the constant look out for opportunities to time the market.
- Discipline yourself financially : SIPs inculcate financial discipline making you invest a fixed amount consistently at regular intervals. By starting early, even with a small amount, you can build a sizeable corpus over a period of time to achieve your financial goals.
- 2x Higher returns than RD : As compared to the conventional FDs, ELSS gives higher returns to beat inflation in an efficient manner.
- Power of Compounding : Compound interest ensures better long-term benefits compared to one time investment
How does a SIP work?
- Every month/quarter a specific amount (decided by the investor at the start of SIP) is deducted from the investor’s bank account and invested in the chosen mutual fund scheme.
- Every time the amount is invested, units of the scheme (as per NAV) are allotted to the investor.
- Since your investment amount gets broken down in equal installments, your investments average out the market ups and downs resulting in averaging your cost.
- Investor can redeem (withdraw) units or switch out to another scheme, anytime he/she wishes to do so. (Please check the scheme related documents as some mutual funds would have a specified lock-in period.)
SIP works on the basic concept of regularity of investments. It works like a recurring investment of a specified amount, which gets debited directly from an investor’s bank account at select intervals.
Once the investor pays the SIP amount, the mutual fund house allocates you with a certain number of units of the scheme you have chosen to invest in, depending upon the scheme’s Net Asset Value (NAV) for the day. With every SIP installment, the investor gains additional units of the scheme.
Since, every time the scheme units are bought at different rates, therefore, with the same SIP amount invested at regular intervals, the investor’s money buys him/her fewer units of the mutual fund scheme during rising markets and more units during declining markets.
Thus, a SIP enables you to lower the average cost of your investment and reduce the risk of your investment by spreading your purchase price over time. This is known as rupee cost averaging.
Moreover, a SIP enables you to regularly increase your investment amount by a fixed amount and get the benefit of compounding as you earn returns on the returns generated by your investment. This is called power of compounding.
Why should you SIP?
One, it imparts financial discipline to your life. Two, it helps you to invest regularly without wrestling with market mood, index level, etc. For example, if you are supposed to put a fixed amount every month in a mutual fund scheme, you need to find time to do it. When you have the time, you might be worried about market conditions and think of postponing your investments. Or you might be thinking of investing more if the mood is optimistic. SIP puts an end to all these predicaments. The money is automatically invested regularly in a scheme without any effort on your part.
Can I customize my SIP?
Yes, you can. Though the most popular SIP is investing a fixed amount every month, investors can customise the way they put money via SIPs. Many fund houses allow investors to invest monthly, bi-monthly and fortnightly, according to their convenience.
Apart from this, Step-up SIPs allow investors to increase the SIP amount periodically. ‘Alert SIP’ is another form of the regular systematic investment plan which sends an alert to the investor to buy more when the markets are down.
In case of the ‘perpetual SIPs,’ investors don’t have to choose the end date of the SIP. Once the goal is met, the investors can stop the SIP by sending a written communication to the fund house.
What is SIP Top-Up
Top-up SIP is a facility whereby an investor has an option to increase the amount of the SIP Installment by a fixed amount at pre-defined intervals. This will enhance the flexibility of the investor to invest higher amounts during the tenure of the SIP.
A Big Goal can be achieved by breaking it into small amounts. Start with the Right SIP Amount and periodically increase your monthly investments through an SIP Top-Up, thereby creating an opportunity to build more wealth & achieve your dreams faster.
A SIP Top Up increases your SIP installment amount over a chosen period, allowing you to TOP-UP your investments with your rising income. Choose to TOP-UP your investments and : Increase your investments with increasing income automatically,
Manage your financial goals better & Reach your financial goals faster.
