What is SIP?
sip stands for Systematic Investment Plan. SIP is not synonymous or a by-product of Mutual Fund scheme. It is only a means or way of investing in Mutual Funds. If you invest in mutual funds by making only one investment, you may expose your entire investment amount to the dangers of market timing. Thanks to the introduction of Systematic Investment Plan, it has become possible to invest and earn capital appreciation by starting monthly Mutual Fund SIPs. SIP gives investors an opportunity to invest small amounts at regular intervals (usually every month) instead of making a lumpsum investment. It is a way of making systematic investments and creating wealth over the long term through investing in Mutual Fund schemes. Investors can start SIP in almost all mutual funds including equity and debt.
Features and Benefits of SIP Investment
First and foremost, the important thing about
sip
It is that investors get a chance to choose the monthly investment amount. However, this monthly investment amount cannot be less than the minimum investment amount mentioned in the offer document. SIP is an ideal vehicle for those looking to invest especially in Equity Mutual Funds. You must be well aware that equity markets are highly volatile in nature. These are unpredictable markets and their performance directly affects the performance of the equity scheme. With SIP, investors can now invest small amounts in equity funds instead of making a lumpsum investment and exposing their entire investment amount to the vagaries of the market. There are some fund houses that give investors the option to start SIP with as little as Rs 500 per month.
One investment technique that can help you multiply your small SIP amounts and grow over the long term is the power of compounding. In mutual funds, compounding refers to the profits earned on reinvested profits. However, compounding is known to work well only if you continue investing in mutual funds through SIP for a long period of time. Through SIP investments, investors can actually target their long term financial goals in life. The beauty of SIP investment is that SIP does not come with a lock-in period in most of the schemes. Individuals can continue investing till their investment objective is achieved. Also, SIP is flexible in many ways. Investors have the freedom to skip SIP of one month in case they do not have enough funds to invest. They can also modify the monthly SIP amount based on their changing income goals and financial needs. If you do not want to continue investing in Mutual Funds through SIP for any reason, you can close your SIP investment immediately. There is no fine or penalty involved for stopping or skipping your monthly SIP. This gives the investor complete control over his mutual fund investments. Another unique technique that SIP investors can benefit from is Rupee Cost Averaging. When the NAV (Net Asset Value) of a mutual fund is low, more units are allotted with the SIP investment amount. Similarly, when the NAV of a fund is high, fewer units are allotted. This is referred to as rupee cost averaging which mitigates the risk associated with market volatility.
Currently there are four types of SIPs available for investment. Let’s understand them in brief
Top up SIP: Top up SIP is a type of SIP investment where investors can gradually increase their SIP amount based on the performance of the mutual fund.
Perpetual SIP: Perpetual SIP does not have a fixed or pre-determined investment tenure. This means that investors can continue investing in mutual funds through continuous SIPs till they are able to achieve their financial goals.
Trigger SIP: A trigger SIP is generally considered by experienced investors who have a good understanding of mutual fund investments and market volatility.
Flexible SIP: A flexible SIP is ideal for investors who face erratic cash flow. Investors opting for flexible SIP can increase or decrease the monthly investment amount depending on the availability of funds.
Individuals new to Mutual Funds should seek professional advice before investing.
“This is an investor education and awareness initiative by Axis Mutual Fund. Investors need to complete a one-time KYC process. For more details visit www.axismf.com or contact us at Customerservice@axismf.com. Investors should only Should deal with registered mutual funds, details of which are available at www.sebi.gov.in – INTERMEDIARIES/MARKET INFRASTRUCTURE INSTITUTIONS section. For any grievance redressal, investors may call us at 1800 221 322 or write to us at customerservice@ axismf.com or register a complaint on SEBI SCORE portal.
https://scores.gov.in
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Mutual Fund investments are subject to market risks, read all scheme documents carefully.