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.
SIP in mutual fund first was launched on December 4, 2010, through BSE Star MF platform.
So, What is SIP and why it so much popular among mutual fund investors?
Systematic Investment Plan is an investment mechanism offered in open-ended mutual fund schemes. Here, small regular investments are made in a particular MF scheme over a long period of time.
It helps in beating the volatility in the market and accumulate large amount at maturity with the small investments made over the period. The investment mechanism is similar to Recurring Deposit scheme in which one saves with the bank and in SIP, one invests in the market and return percentage is far better than RD.
SIP works on a simple formula, Start Early with Regular Investments to create wealth.
It is always difficult to time the market correctly to make huge fortunes due to n numbers of factors constantly affecting the market. But with SIP, it reduces the factor of volatility in the investment as it is spread over a long period of time.
The market constantly moves in an up and down direction. Since an SIP invests regularly in the market whatever the market condition is, some investments are locked when prices are low and some at higher prices. Therefore, it helps to average out the volatility and achieve a lower average cost per unit.
SIP calculator is provided on different platforms. These are very comprehensive and easy to use. An investor needs to mainly provide three sets of information i.e
The chosen SIP calculator will compute the data given and will show the expected return of the investment in a Graph or Table format with expected maturity value.
To start SIP on a particular scheme, an investor has to submit following documents with specific details and mandate.
From 1st April 2018 tax on equity mutual funds shall be applicable on LTCG above Rs.1 lakh p.a. @10% without indexation benefit. For equity funds, the period of holding more than 12 months is regarded as long term.
While Debt mutual funds with more than 3 years on investment horizon are taxed at 20 percent with indexation benefit.
Those SIPs which continues until the time one redeems the investment and new units gets added to the investor's portfolio.
For equity mutual fund all those units added in the past one year of the SIP tenure and gains on those added units are taxed under Short term capital gains @ 15 percent. For debt funds, the capital gains arising from the units added in the past 3 years of SIP tenure are taxed @ 10 percent.
Investment in mutual funds through SIP is a game changing development for the industry and investors. Moreover, it has helped many small investors to become a part of the system who could not afford to invest a lump sum in mutual funds earlier. In SIP, patience and a right fund will work wonders for the investor in long term.
Now, that you know what is SIP in mutual funds. You are also clear on how SIP works and how to start SIP online. What do you think? Is investing through SIP in mutual funds good?
What are benefits of SIP in mutual funds investment? 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.
What is Fincash Review? Login and invest in SIP in Mutual funds 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.
How does 3 year lock-in period work in ELSS while investing via SIP? 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.
How to invest in mutual funds with or without demat account? Investors looking to invest in mutual funds without a Demat account can invest through financial institutions, independent financial advisors, AMC, and online portals.
Can NRIs invest in mutual funds in India? Yes, any NRI can invest in mutual funds in India, if they follow some certain conditions under Foreign Exchange Management Act or FEMA Act 1999.
Are market highs good to invest in Equity mutual funds? Understanding the relative position of the market, the absolute values do not matter much. What matters is what is the earnings multiple, currently the market is trading at, popularly captured by a metric called P/E ( Price to earnings).
Is Groww the perfect platform to invest in mutual funds? Groww is one of the best mutual fund applications that offers various direct mutual fund investment options. Moreover, it does so without charging anything. It offers a magnitude of offerings and features ranging from the brief description of the mutual funds to the various brokerage and other calculators for investors' references.
Should you take a Loan to Invest in Mutual Funds? Borrowing money for investing in mutual funds never really pays off. Its not the right thing to do given that mutual funds returns would not provide sufficient returns in the time which your loans have to be paid back.
How can NRIs from the United States invest in Mutual Funds in India? NRIs living in the United States can invest in Indian Mutual Funds, but there are some hassles that have to be overcome. You will require an NRE, NRO, or FCRN account in order to convert the foreign currency into Indian rupees, post which you can complete the KYC and begin investing in Indian Mutual Funds.
Is Groww App Safe for Mutual fund and Stock Investing? Yes, Groww app is completely safe for mutual fund, stock investing and trading. As a popular mutual fund investment plaftorm, Groww established itself quite well in the past few years. Now, it has also enetered the stock broking space so it's really good to see new entrants amid existing top discount brokers in India.