Systematic Investment Plan (SIP) – What is SIP, Benefits & Choosing SIP Plans
Invest in mutual funds through SIP or learn about advantages of investing through SIP
Invest in small amounts regularly
Opt for monthly auto-payment
No worries about market ups & downs
Plan budget and expenses better
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1. What is SIP?
Systematic Investment Plan, commonly referred to as an SIP, allows you to invest a small sum regularly in your preferred mutual fund scheme. By activating an SIP, a fixed amount is deducted from your bank account every month, which gets invested in the mutual fund of your choice.
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Types of Mutual Funds
Considering to invest in Mutual Funds? It is important that you understand the types of mutual funds and their features
2. Benefits of investing in SIP
With an SIP, you can get started with your investment with a small amount and reap significant returns in the long run. It’s simple and the most convenient way of investing in mutual funds. It also brings financial discipline.
You can invest in a disciplined and phased manner through an SIP. It gives you the convenience of starting your investment with as low as Rs 100 a month.
Rupee Cost Averaging
You don’t have to time the market. You buy more units when markets are low. This reduces your overall cost of investment.
Power of Compounding
You will unleash the power of compounding on investing over a long period. The rupee cost averaging phenomenon will ensure that you get better returns as compared to a lump-sum investment.
2x Higher returns than RD
ELSS mutual funds have the potential to provide much higher returns than bank FDs, PPF and other traditional investment options.
3. Why invest through SIP
The concept of SIP focuses around the philosophy of “Save First, Spend
With SIP, you can invest small amounts at fixed intervals ( weekly, monthly or quarterly) instead of doing a one-time investment.
Power of Compounding
The rupee cost averaging results when you stagger your investments over a long period. This ensures that you get much more returns as compared to a lump-sum investment.
Start with as low as Rs 100 a month
You can start investing in mutual funds through an SIP with an amount as low as Rs 100. Over time, you can increase your monthly SIPs when you get the feel of what mutual funds are capable of.
Rupee Cost Averaging
The equity market is volatile, and when you invest via an SIP, you will buy more number of units during a slump and less number of units in a booming market, and as a result, you would decrease the cost per unit in the long run.
Become a disciplined investor
Investing via an SIP would make you disciplined in terms of managing your finances. With the option of automated payments, you don’t have to go through the hassle of investing manually every month.
Acts as an Emergency Fund
You can stop your SIPs at any time, and the fund house has no say in this. Also, you can redeem your investment at any time (if there is no lock-in period).
4. SIP or One-time : How should I Invest?
Often, first-time investors get confused about choosing between an SIP investment or one-time investment.
In this mode of investment, you make a one time payment of a considerable sum of money.
On the other hand, in an SIP, a fixed amount of sum is deposited at regular intervals of time in a mutual fund scheme. In short, one-time investment mode can be chosen if you have money in hand right now that can be invested, and an SIP can be chosen if you are expecting a regular inflow of money in future. First-time investors are advised to take the SIP route.
|SIP Investment||One-time Investment|
|Periodic investments in a tenure||One-time investment in a tenure (lump sum)|
|Earns better during market lows||Earns better during market highs|
|SIPs can protect investments from potential market crash||One-time investments can lead to major loss during market crash, which happens often enough|
How To Invest in SIP
Set Investment Goals
Every mutual fund is built around an objective to achieve. You have to analyse your requirements and choose that fund which is in sync with your goals and risk profile. If you are finding it difficult to choose the right mutual fund, then let us know your requirements, we will shortlist funds accordingly.
Decide between SIP or lump sum
There are two ways of investing in mutual funds; a lump-sum investment or stagger your investment over time via an SIP. You have to assess your profile and choose to invest either a lump sum or an SIP.
All our mutual fund investments mandate KYC documentation and a net banking account. Undergoing KYC verification is mandatory as per the norms of the Securities and Exchange Board of India (SEBI), without which you cannot invest in mutual funds, and it is a one-time process. There is usually no need to sign cheques and fill out forms if you are investing in mutual funds with us.
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5. Frequently asked Questions
As a tax-paying citizen, the Section-80c of the Indian Tax Act allows you some breather –
a deduction of up to 150,000 from your total annual income.
Why should you choose to invest via a systematic investment plan?If you are short on cash to make a lump-sum investment or if you want to reduce your risks, then you can choose an SIP. Also, an SIP would bring in discipline, which helps you make logical decisions instead of succumbing to greedy impulses.
When is the best time to invest in SIP?There is nothing like good timing when it comes to investments. It’s more about what you need from that investment. In an SIP, you can automate your transfers, and be hassle-free about the date in a particular month. With investing via an SIP, you don’t have to time the markets.
Should you choose SIP for long-term wealth creation?A customer can choose any investment period. But, it has been proven that a long-term investment (5 years and longer) has been rewarded with greater returns as compared to short term investment.
How much should you invest in a mutual fund through SIP?In an SIP investment, you can start investing as low as Rs 100 a month. You can increase your investment once you get accustomed to mutual funds.
Can I miss an SIP payment?Yes, you can miss your payment and still your account wouldn’t be deactivated. There are options to pause your payments in various mutual funds.
Do all investments through SIP have tax benefits?Only investments in ELSS mutual funds through SIP have tax exemption of up to Rs 1.5 lakh a year under Section 80C.
Is SIP safe?An SIP is just a mode of investment. The safety/risky component is related to the fund you choose.
How do I start my SIP investment?You’ll first have to choose the fund which is in line with your requirements and risk profile. After that, you have to sign up and create an account. Fill all the requested details and initiate an SIP.
How to shorten SIP duration?This can be done online by logging into your investment account. Alternatively, you can visit the branch of a fund house and submit a duly filled application.
How can I extend my SIP duration?At the end of your SIP term, you will get an option for renewal of your investment. You can fill out that form and then choose the desired duration of the investment.