What are benefits of SIP in mutual funds investment?
- Asked By
- Updated On:27-Jan-2021
- Replies:6
Short Answer
SIP stands for Systematic Investment Plan. You can invest a fixed amount of your choice and set a specific date for investing your money monthly, bi-monthly or fortnightly.
Detailed Answer
SIP stands for Systematic Investment Plan, a quite popular term you shall hear in any discussion on investing in mutual funds. In fact, SIP in mutual funds has gained a lot of traction in the past few years that people are curious to know all about it.
So, if you wish to invest small but regular amounts in a mutual funds scheme, SIP is the common way to do it. You can invest a fixed amount of your choice and set a specific date for investing your money monthly, bi-monthly or fortnightly.
What are benefits of SIP investments or investing in SIP in mutual funds?
- You can start regular investments even with a nominal amount like Rs.500-Rs.1000 as well. You don't have to worry of having a lumpsum to invest. Small but regular initial investments anyways help to accumulate a good corpus.
- A financially disciplined life with regular savings and long term investment planning.
- Explore better returns as compared to traditional alternatives. But, this is subject to market risks.
- Earn through power of compounding and grow your money in a systematic manner.
- You can also modify SIP amount on a periodic basis as per your convenience.
- If you are looking for disciplined investment options, starting an SIP might prove fruitful in the long run.
Ask Your Query for FREE, Get quick answers from our FINTRAKK community!
Discussion (5)
Systematic Investment Plan is an organized investment method that enables one to invest fixed amounts of money at regular intervals – usually weekly, monthly or quarterly. SIP usually deals with mutual funds investments. Popular equity-linked investment programs – such as the Equity Linked Savings Scheme (ELSS) – can be approached with SIP. Investing in ELSS by means of Systematic Investment Plan can be highly beneficial to the investor, not only in terms of the investment returns but also with regard to the tax exemptions on dividends for investment amounts up to INR 1,50,000/-. Some benefits of SIP are as follows: 1. Maximum benefits with minimum investment rates. 2. Reduced risk due to Rupee Cost Averaging. 3. Organized means of investing in instalments. 4. Effective from a long-term perspective. 5. Encourages investors to start investing early.
A SIP or a systematic investment plan is an investment avenue through which investors can invest a fixed amount regularly in mutual funds. The investment can made either in monthly, quarterly or yearly basis. The key benefits of an SIP investment are: 1. SIP investment lets you leverage the benefits of compounding and rupee cost averaging. 2. It teaches you investment discipline. 3. SIP is a convenient form of investing because it allows you to invest even as little as Rs.500 on a periodic basis. Also, when you invest in SIP you don’t need to time the market In addition to that there are experienced fund managers to handle your investment.
• You can begin with sip investment plan even with a notable sum like Rs.500-Rs.1000 also. You don't need to stress of having a lump sum to contribute. • Little yet standard starting speculations in any case help to aggregate a decent corpus. You can likewise change SIP sum on an intermittent premise according to your benefit. • Gain through the influence of aggravating and efficiently develop your cash.
SIP seems to be a disciplined way of investing. Nicely explained! We can start smaller amounts of SIP as per our convenience. This sounds very interesting. There is scope to earn better returns also as compared to other investment options like PPF or post office saving schemes.
Fixed Deposit (FD) are saving tools offered by banks to deposit lump sum amount for a fixed period of time on a higher interest rate than saving accounts. Mutual funds are investment products which pool money from numerous small investors to create a fund.
The introduction of Systematic Investment Plan (SIP) in the mutual fund is regarded as one the major breakthrough in the financial sector. It has helped to attract a new class of investors in the sector who were not comfortable to invest a lump sum at a time.
SIPs or a Systematic Investment Plan is a great tool to build money in the long run with a minimum time period of 5-10 years. It offers multiple advantages like a low minimum capital requirement, averaging benefit, formation of investing habits, etc. However, the most adequate time to stop your SIPs is when your financial goals are met or when you feel to change the objective of your investments.
Fincash is a yet another online investing platform that was started in 2016 or you can call it a fintech startup. Having raised funding, it has grown fast to give tough competition to other market players.
ELSS or Equity Linked Savings Scheme is a type of tax-saving investment instrument. It provides returns, similar to equity funds and offers a tax reduction under Section 80C. If you invest in a SIP method, every contribution towards the scheme will be considered as a separate investment and will incur a 3 year lock-in period.
Investors looking to invest in mutual funds without a Demat account can invest through financial institutions, independent financial advisors, AMC, and online portals.
No, a demat account is not required for SIP or Systematic Investment Plan because a SIP can be purchased directly from an AMC (Asset Management Company), a third-party financial advisor, your bank, or other online platforms.
Building wealth always seems to be a farfetched idea if you want it quickly. However, if you wish to build it legally, then there are different ways to build wealth. Check them out.
Mutual funds are professionally managed investment vehicles that offer numerous categories of funds to investors. To generate regular cash flows or income, investors can use the Systematic Withdrawal Plan or invest in Dividend Payout and Debt funds to receive regular income. Debt funds provide regular interest payouts, whereas dividend payout funds give regular dividends which act as regular income.
For a salaried class, there are many places where investments done. Know the best investment options for salaried person in India. The best investment options for a salaried person are Gold investments, PPF account, national pension scheme, ELSS, and fixed deposits.
shikha
SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). In SIP your money is auto-debited from your bank account and invested into a specific mutual fund scheme. You are allocated a certain number of units based on the ongoing market rate (called NAV or net asset value) for the day. Here are some major benefits Disciplined Saving- When you invest through SIP, you commit yourself to save regularly: 1. Flexibility: While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. 2. Convenience: SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.