How does SIP work?
SIP is a way of investing in mutual funds. In SIP, you invest a fixed amount at regular intervals to achieve your financial goals. SIPs make it easy for retail investors to invest in equity and debt instruments.
Suppose you want to invest in stocks but you do not have enough capital. If you choose SIP in Equity Mutual Fund, you can start investing in the stock market with Rs. 500 every month. Doing this consistently for a few years can build enough wealth to meet your medium term and long term financial goals.
You can also choose the lump sum method to invest in mutual funds. Here, you invest in the fund of your choice at a time. The lump sum method is helpful if you have significant capital and understand market trends and price movements.
There are many SIP benefits that make it a great investment tool. The main reasons for the popularity of SIP mutual funds are as follows:
1.
you can start today
The golden rule of investing is to start early. Often, the reason for delay in investment by investors is lack of funds. But since SIP mutual funds allow you to start with less capital, you can get started right away. Also, when you invest in a SIP, a professional fund manager takes care of your money, so you don’t have to worry about managing your portfolio.
2. There is no need to time the market
When you invest in mutual funds through SIP, there is no need to give time to the market. This is because SIP mutual funds apply rupee-cost averaging. Since you regularly invest irrespective of the market price, more units are bought when the price is low and fewer units are bought when the price is high. It averages out the cost of your investment over a long period of time while hedging the risk of market volatility.
3. You Can Make Goal Based Investing
When you have goals, such as buying a car, traveling to places on your bucket list, saving a down payment for your first home, funding your wedding, and more, it can be a daunting task to meet all the expenses. may seem like a task.
However, an advantage of SIP is that you can invest small amounts regularly and meet your goals over the desired time period. You can use an online SIP calculator to understand how much money you need to invest monthly to meet your goals and plan accordingly.
How to start SIP investment?
Now that you know the benefits of SIP, you must be wondering how to invest in one. You can easily open a SIP account online. However, you should first identify the type of mutual fund based on your goals, risk appetite and investment horizon. Once you know this, you can look at the various mutual fund schemes offered by the top asset management companies (AMCs) of the country.
After applying for limiting mutual fund scheme, you can create an account online with AMC by entering your name, phone number and email id. You can then choose the mutual fund scheme and choose the SIP option. Set the SIP amount and frequency, upload your KYC documents and a copy of the canceled cheque, and you are good to go!
Depending on the AMC, it may take around 15 days for your SIP to be registered. The primary difference between starting a SIP online vs offline is that if you want to opt for the offline route, you need to approach the customer representative of the AMC, fill up the form and submit it to the fund house’s branch office.
closing thoughts
A SIP mutual fund is a great way to inculcate the habit of disciplined investing. It helps you to earn from the markets while hedging the risk of volatility. So, whether it is a bull market or a bear market, you need not stop your SIP investments.
You can also enjoy tax benefits by investing in tax saving mutual funds like Equity-Linked Savings Schemes (ELSS). Whether you are new to investing or a seasoned investor looking to make your portfolio more solid, SIP mutual fund investments are worth exploring.
Disclaimer:
an investor education initiative
meeting
www.icicipruamc.com/note
To know more about the process to fulfill the Know Your Customer (KYC) requirement for investing in mutual funds. Investors should deal only with registered mutual funds, details of which can be verified on SEBI website
https://www.sebi.gov.in/intermediaries.html
For any queries, grievances and grievance redressal, investors may contact the AMC and/or Investor Relations Officers. In addition, investors can also file complaints on
https://scores.gov.in
If they are dissatisfied with the proposals made by the AMC. The SCORES portal allows you to register your complaint with SEBI online and view its status later.
Mutual fund investments are subject to market risks, read all the documents related to the scheme carefully.