Get Detailed Information About SIP Mutual Funds
SIP, or a systemic investment plan, is a tool that allows investors to invest at regular intervals of time using fixed amounts. SIP mutual funds allow the investor to sit back and not worry about timing the market. This allows for easy investing without any hassle. You can give your bank standing instructions to debit the required amount every month. It is suitable for anyone who does not want to start their investments with a large amount of money.
SIP plans are becoming more popular in the Indian mutual fund market as they allow the investor to invest in a disciplined manner without having to worry about the ups and downs of the market. SIP investments are the best way to enter the world of mutual funds.
When and how do I start a SIP plan?
SIP mutual funds allow the investor to start investing efficiently in a time-based manner. You can invest a set amount at predetermined intervals in a mutual fund scheme.
The initial money invested can be as low as Rs. 500, and the pre-defined SIP intervals can be weekly, monthly, quarterly, semi-annually, or even on an annual basis. Some SIP plans even allow investments as low as Rs. 100.
SIP mutual funds can provide long-term benefits due to average costs and the power of compounding. You can start a SIP online directly through an AMC. You can also do it offline, through a mutual fund distributor or agent.
Benefits of SIP Investments
There are many benefits to investing in SIP plans. This allows it to be one of the most preferred forms of mutual fund investment.
- Compounding
Benefits over a long period tend to get better with the power of compounding. Compounding works by reinvesting your profit over a long period, thus accelerating the profit-earning process. To fully benefit from the power of compounding, you should begin investing as soon as possible. You would also have to stay in the SIP mutual fund scheme for as long as you can. You can easily calculate compound returns through your SIP plan with the help of various easy-to-use SIP calculators available online.
- Starting early
This goes hand in hand with the power of compounding. Once you start early and invest regularly, it will be easier for you to achieve your goals. It makes a big difference. It isn’t about how much money you start with. Having a small amount of money to begin your SIP plan with will go a long way if you stay invested for a long time.
- Does not require a huge initial investment
SIP plans allow you to start investing with very little initial capital—as little as Rs. 500 every month. This is great if you don’t want to start investing a lot of money or if you do not have enough resources. This also allows you to grow your SIP investments at your convenience. You can add more to your SIP earnings as you grow financially. This is done with a top-up SIP or a step-up SIP.
- Invest at your convenience
With SIP investments, you can choose your initial amount, starting with as little as Rs. 500. You can also select your SIP date. If you are a salaried individual, choosing a SIP date at the end of the month makes sense. This is because you will have enough money in your bank account for the SIP deduction. This also prevents the bouncing of your SIP instalment. Some mutual fund houses allow you to vary your SIP contribution by using smart SIPs. This is based on the movement of some pre-criteria such as the index level, the P/E ratio, etc. SIPs leave a sense of financial discipline with investors in the long run.
- Returns
Fund managers are experts who manage your SIP mutual funds. They collaborate with their team or market research analysts to develop schemes that maximise your returns. Professional management can help you earn a lot more in the long run. Also, you can avail of tax benefits only on SIP investments in Equity Linked Saving Schemes (ELSS). Every year, you can get a tax deduction of Rs. 1.5 lakh on ELSS.
- Disciplined savings
SIP plans require you to make regular investments. This may be monthly or annually. This ensures that you have a habit of saving money. It also means that you can make your money grow over time by staying invested in market-linked investments that have the potential to beat inflation. This ability of mutual funds to help you generate inflation-beating returns is not a characteristic of many other mutual funds.
Key Points
- SIP investment is one of the best forms of mutual investment, but it has to be done regularly over a long period.
- Under Section 80C of the Income Tax Act, investments made through ELSS are eligible for a tax deduction. You can save tax every year by investing in a SIP plan.
- You can even make your portfolio more diverse by investing in SIPs in two or more funds.
- You can hold on to great compounding benefits by holding your SIPs for a long interval of time.
- Start investing as early as you can to reach your goals.
In conclusion
SIP investments are not free of market risks. They are only a tool that helps you invest steadily in mutual funds. However, when compared to other mutual fund schemes, SIP funds provide better returns and are more user-friendly. For more information about SIP funds, connect with finance houses such as Piramal Finance.