Investing in markets used to be one of the riskiest way and as a traditional customer one used to stay away from making any large investment in these funds. But with the emergence of SIP’s things have turned for good and now every year more & more new customers are looking to begin their investment in SIP Mutual Funds. Here with this blog, we are going to give a quick check on the 10 most important points that one should understanding before investing with SIP.
What is SIP?
Systematic Investment Plan or SIP Mutual Funds is a flexible way of investing in the markets that have shown tremendous returns as per the conditions prevailing in the Indian Economy. Catering to high risks that were seen in Mutual funds directly, this organized and calculated way have given the customer options to make their own customized plan to invest in the market at minimum flexible and month by month basis rather than one lump sum amount.
Do SIP and Mutual Funds are the same?
Yes, ‘SIP or Systematic Investment Plan’ is actually a sophisticated monthly wise investment in Mutual funds only. Amount once submitted goes in multiple mutual funds rather than a single fund which results in marginal risk management. This benefit along with cost rupee averaging check for market volatility has given the modern investor a comprehensive way to invest in SIP mutual funds respectively.
Do SIP have less or more risks when compared to mutual funds?
Although the money we invest with SIP goes in the same mutual funds’ risks are tremendously lowered as it uses multiple diversifications. As per SIP, your money will then be divided into further funds lets say around 80 funds from which you get benefits in around 50+ funds and rest are either equal or low still you are in the safe zone with positive returns. These better returns get higher and higher with duration to give you a large amount at the time of your long-term goals respectively.
Are they Taxable?
It all depends on the type of Mutual funds which you can choose while starting your SIP. With Equity Mutual funds you need to give 15% tax on your gains if taken before one year with no tax after that. With Deb Mutual Funds 20% tax is redeemed on the gains after three years of investment or the income slab under you are if taken before three years. While on the other hand with ELSS Mutual funds one can claim tax benefits under Section 80C up to the amount of ₹1.5 lakh.
As the recent trends have shown in the markets SIP have proven a lot of success when allowed to progress for more than 10 or more years. Although there are no specified time or duration for which SIP have better return values with continuous market volatility and economic instability takes around a few initial years for getting higher returns later on.
Is SIP better than Bank FD/RD?
In the last ten or more years, SIP has shown tremendous growth in double-digit return or more in the range of 15-25% which is double than you receive with normal Fixed Deposits or Recurring deposits. They have better return values to fight inflation when comparing to FD return values. SIP as an investment has attracted even the most traditional user to kick-start their investment in the volatile markets.
Is the SIP amount flexible?
When SIP started it was allowed to change the amount at per customer discretion but with few changes have come making the whole process complicated. But it is an easier option to start a new SIP with increased or lowered amount to get the desired benefits easily. This allows for better diversification in your investment portfolio and further explore market opportunities at a different scenario. Most of the SIP funds have a minimum amount on which you can start from easy ₹500 on monthly basis.
What are Exit Routes for SIP?
Each SIP fund in the market might have their own exit load depending on the time. Generally, there is a 1% exit policy if taken within one year and nothing thereafter. Also, there are few funds where the exit load is taken from the amount which is to redeem. While on the other hand few ELSS taxes saving mutual funds Sip have three-year lock-in period termed as ‘close-ended mutual funds’, also open-ended mutual funds are there with no lock-in time.
Can SIP be Started Online?
Yes, all SIP features are available online with complete services to start or end with your personal credentials only. With digitization and ease of internet, these 24×7 online platforms are built to give complete accessibility, monitoring, and tracking from around the world. You have all the options to keep, withdraw, invest, disinvest and further opportunities to take effective decisions based on the financial expert to advise.
Which SIP to choose from?
It all depends on the past values, present surroundings and future perspective of the respective funds. A Certified Financial Planner can provide you with all the necessary details to reach appropriate values for SIP funds. Child Education planning, Marriage funds, Home loans, Retirement funds are some of the ways for which you must plan with the amount as well as duration. Every year values of SIP and their return will change it all depends on understanding the past and current values to come up with future prediction.
With WealthCare India you are entrusted with one of the top wealth management firms who is already connected with thousands of clients in transforming their future wealth generation. We have the best financial experts to manage your investment and give appropriate advise on taking the right decisions as per the market scenarios. Our feature-rich online platform has all the information, calculators, portfolios, tracking, and guidance for staying connected with customers on all front.