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  • Category: Mutual Funds

    What is meant by SIP? Is it some kind of investment? How it is related to mutual funds?

    Wondering what is SIP? Looking out for detailed information about SIP like what is it and its benefit? Check out this page for advice from experts and get the first hand details in laymen's language.

    Whenever anyone speaks about mutual funds there is a term also used related to it which is SIP?
    Is it some kind of investment? If it is, what is the minimum requirement for it and what are its benefit?
    Can you explain SIP with all the requirement necessary for it and if possible in a laymen language which could be easily understood by anyone?
  • #146296
    SIP stands for systematic investment plan. And it is being used for investment into mutual funds and the stocks. Think of it as a monthly, weekly, quarterly investment plans where you can choose how much to invest into the mutual funds.

    If you can't afford lumpsum investment into mutual funds then SIP is the route people take for investment. And cost average for the purchase of units helps with the SIP mode during the market up and down period.

    SIPs have minimum of 500 Rs for most of the funds. Liquid funds can be started with the 500 Rs. And some of the ELSS and debt funds can be started too. However most of the equity funds are priced at 1000 Rs and higher.

    SIP is necessary because not all of us can invest say 2L and 3L out of out pocket in single day. And by using the SIP route you can invest say 5K per month and reach upto 2L in specific time period. This way your risk is reduced in the mutual fund market. Also you can have other priorities in the life for purchasing things and paying bills. So SIP does not drain your budget like lumpsum investment into equity market. This is the basic requirement behind this concept.

  • #146298
    SIP is systematic investment planning.
    In simple terms our savings should grow well, one of the tools to make it grow is investing in mutual funds. Mutual funds are nothing but a group of shares whose performance is assessed, mointored and changed by a manager. It is good for people who don't have the idea of dealing with individual shares where the risks and rewards can be high. In mutual funds the raise and fall can be spread out when compared to individual stocks.

    There is no real minimum amount but most funds start at 500 or 1000 rupees. You can decide on the amount and the date every month based on the funds and your risk appetite and start it. You can do it online, via your bank or a investment house or agent. Most often there are no charges but the company gets a commission from the Mutual fund house itself.

    Next why SIP. To make our money grow it's ideal to invest when the market is down and then hope that it rises up quickly. In real life, it is very difficult to time the market, hence if you buy a mutual fund in SIP mode, say every month, then the law of averages mean that you would be closer to the average price. This over a longer period 5-10 years spreads out your risk of not having to time the market and also helps the money to grow.

    Mutual funds are good for some who wants to save money for the future,get returns better that a fixed deposit but does not want to take too much of risk. Many experts urge us to start as early as possible (age at investment), so that you can have good returns. Lastly it is very important to realize that Mutual funds are also exposed to risk. Say we have invested for our retirement and to our ill-luck if the world is going through a major crisis or the stock market crashes, then we would not get all our money back at that time. We would have to wait for the markets to stabilize, recover and then encash our mutual funds.

    If our knowledge of mutual funds is very less, then it would be better to discuss with a financial planner or advisor

  • #146321
    A SIP is a Systematic Investment Plan. In this plan, an investor invests a fixed amount of money every month, well- A SIP helps you to invest a small amount in a mutual fund scheme of your choice. This fund will manage your investment portfolio, These mutual funds are good for the people who don't have much time to study the share market and understand which is good for investment and which to purchase and which to sell. MF manager will manage your portfolio. The mutual funds' investment gives a better return than FDs.
    always confident

  • #146325
    SIP stands for Systematic Investment Plan. It is just like Recurrding Deposit instalment. In every quarter/month/ fortnight, an investor is required to invest a pre-determined amount in the chosen mutual fund scheme, just like a person has to pay a pre-determined amount in a recurring deposit of bank or post office.

    Now the next question is what is the benefit of SIP. We all know that equity market (and to some extent debt market) is volatile. At the same time, nobody can predict the movement of market. So, an investor must not try to time the market. If an investor puts money in the chosen mutual fund scheme at fixed interval, he/she can take the advantage of short-term volatility of the market through SIP. That is the reason behind the advice of investment experts to invest in mutual fund schemes through SIP.

    Beware! I question everything and everybody.

  • #146335
    SIP (Systematic Investment Plan) is the most popular form of investing in Mutual funds. It is very convenient and useful for the people who can not invest as a lump sum amount in Mutual funds.
    By opening an SIP account in a particular fund the investor allows the fund manager to withdraw a fixed amount at a specified time every month from his account and invest it in that particular Mutual fund scheme. This way small amounts are invested every month and in long run depending on the scheme accumulate to a good corpus.
    To some extent it takes care of market fluctuations also and gives the investor an average return in line with the increase in the total corpus of that fund scheme.

    Thoughts exchanged is knowledge gained.

  • #146373
    SIP stands for Systematic Investment Plan. SIP is a platform which allow us to invest a stable amount systematically at a stated persistence convey, monthly or quarterly. A plan is a simple way of investing used over the globe as a factor to composing money. The big advantage of SIP is anyone can invest because one can start with investing minimum amount of Rs 500 per month. The other benefit of SIP is you can take out the money anytime. Mutual funds like Adarsh Credit which does not allow that benefit. SIP is good for long term investment goals. The other benefit of SIP is Power of compounding. Simple interest is when you take interest only on the principal. In the condition of compound interest, the interest quantity is joined to the principal and interest is figured on the new principal. This progress carry on every time.

  • #146380
    We are familiar with the Fixed deposit accounts and Recurring Deposits in banks. The first is a lumpsum deposit for a predecided fixed period, The second one is a regular deposit of a fixed ,relatively small amount every month for a pre-decided period.

    In mutual funds investment earlier only lump sum investments were only possible. That kept many people like the monthly fixed salary earners not able to invest n mutual funds. As they can earmark only small fixed sum every month, they have to accumulate in small amounts and then invest the accumulated amount. This many times posed problem as the Mutual Fund units are subject to price fluctuations. N times of adverse situations investor may end up losing more, just because he could not have a lumpsum a few months earlier.

    So n order to encourage small investors the SIP- Systematic Investment Plan – was devised. Under SIP investors contract to invest a fixed sum every month upto a pre decided period. By this the amount invested is converted to units at the prevailing price. Thus eventhough the investment ill be subject to price fluctuations every month, the investor will not suffer or gain in one instance at a stroke. There will be a sort of averaging effect either gain or loss.

    Thus SIP is a facility which will help small investors invest comfortably in small amounts regularly and getting the benefit of averaging as explained above.
    The basic requirements of starting a SIP for MF are like a bank account . You need to comply KYC- that means you should keep ready PAN,address and ID proof like Aadhaar etc and the bank a/c details and proof.

    You can approach an established and reputed investment agency or you can directly approach fundhouse which have their Mutual Fund(Eg, Birla Sun Life, Franklin Templeton, Reliance Mutual Fund etc). If you are directly going to deal with the fund house. If you intend to deal directly with a fundhouse you can also do same online in their website. As a beginner it is better to approach the fundhouse branch office near you or the franchisee office near you in person, keeping the documents needed for KYC and bank a/c mentioned earlier. Along with other papers,you may need to give an irrevocable authorisation to your bank for recovering monthly SIP amounts.

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