SIP or Systematic Investment Plan is a policy where a person has to invest in a certain fixed amount at regular intervals of time. This is not a mutual fund product but a type of investment scheme. It is a tool that automatically invests in a certain policy, usually an equity scheme policy.
It is not advisable to make a lump sum investment in any of the Mutual Fund schemes, especially in equity mutual funds. So, in such a case SIP is mostly adapted to be the best way possible. For salaried people, this is highly convenient.
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Why you should go for a SIP?
- For one, it builds financial discipline in your life.
- Secondly, the investment is made on your part without much trouble.
- For instance, if let’s say you are about to invest in mutual funds. And before investing in using a lump-sum feature, you start calculating the market conditions and the returns. So, for a normal salaried citizen, this might prove troublesome and tiresome. But, SIP eradicates all the worries that might pop up in the mind of anyone as, without much calculation, the amount is invested.
- Moreover, if you invest in regularly, the cost and returns of the investment average out by itself. As you get more you would get more units when the market is low and fewer units when the market is high.
- In addition to all this, the law of compounding works like a charm while investing in long term equity schemes. As you would get the interest earned on the interest of the previous year. So, in the end, you’d have a huge investment by putting in small amounts in a regular interval of time.
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Customization available in SIP
The SIP schemes have a customization feature attached to them.
- First of all, the amount invested in a scheme could be as low as Rs.500.
- Next, the amount invested could be in the time period of bi-monthly, monthly or fortnightly as per your conveniences.
- Also, the investor could increase the amount periodically in a systematic manner.
- Furthermore, there’s a feature of ‘Alert SIP’, which sends an alert to the investor to invest in more, when the market is low.
- While investing in ‘perpetual SIPs’, the investor needn’t have to choose an end date of the SIP. A written application is enough to stop the investment in such.
- Likewise, an investor can increase the period of investment if he/she desires.
Top 5 investment plans to invest in 2019
|Scheme name||3-year return (%)||5-year return (%)|
|SBI Bluechip fund||11.43||15.49|
|Franklin India equity fund||10.62||15.70|
|Mirae Asset India equity fund||17.33||18.21|
|HDFC mid-cap opportunities fund||13.45||18.30|
|ICICI Pru bluechip fund||14.48||14.48|
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Some FAQs related to SIPs
- Q- Can one incur a loss while investing in SIP?
- A- Yes, it is possible. But it is recommended to invest in for medium or longer durations like (7-20 years) to gain high returns on your investments.
- Q- How to stop a SIP?
- A- You have an option to stop investing in your SIP anytime. Also, you can stop investing in your SIP for 2 months and it will automatically terminate without any additional charges.
- Q- Is SIP completely risk-free?
- A- No it isn’t. But comparing to other ways to invest in, it is comparatively cheaper and includes high returns.
- Q- What’s the penalty of missing a SIP payment?
- A- There isn’t any penalty in missing a SIP payment. But if you don’t invest in for 2 consecutive months, then the scheme would be terminated automatically.
- Q- Can the feature of a lump sum be added to SIP investment?
- A- Yes, this feature is available in SIP payment schemes.
How to start SIP?
This is an online procedure showing step by step procedure of starting a SIP
Step: 1 Completing KYC formalities
- First, go to eKYC facilities. You can visit services like Karvy or CAMSonline to register yourself for the same.
- Now, you need to provide your name, date of birth and contact details, among other basic information. At this moment, you would be required to upload soft copies of your PAN card, address proof and photograph to support the details provided.
- Finally, for in-person verification, schedule a video call and show the PAN card and address proof.
Step: 2 Registering for SIP
- First of all, go to the website of the fund house offering the scheme.
- Click on to register as a new user.
- After this, fill in your personal details and contact information.
- Now, create a username and decide your password for online transactions.
- Finally, put in the details of the bank account through which the transaction will be carried out.
Step 3: Selecting the right SIP
This step is where you decide which SIP is suitable according to various factors involved while investing in such. It is mentioned above under the ‘Why you should go for SIP’ heading.
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