October 31, 2017, 5:56 am

5 Important Things You Didn’t Know About SIP

by: The Financial Blogger    Category: Investment, Market and Risk
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SIPs feed on the volatility of markets and generate wealth from market tides. Though based on the basic market concept but surfing the money market waves requires a complex set of abilities and skills.

Veteran fund managers employ latest financial models and software and automatic money market timing instruments to ride the money market wave successfully.

SIP is the answer to the investment need of investing in the volatile yet gainful money markets without getting thrashed by the market waves, and mutual fund managers are increasingly supplying better to this need by making the SIP more investor-friendly. Most first time investors in SIP would be surprised to know the following investor-friendly features of SIP that make it so attractive for investors:

  1. SIP Investment Amount Can Be Very Nominal

Investors need not shell out lump sums for investing in mutual funds. By doing SIP investment, they can start investing with as little as Rs 500 to 1000 a month. As the money flows in more well-chosen units are bought by the investor and within quite a less time frame a well-diversified portfolio is created which yields high returns and the risk is completely diversified out. SIPs start showing very good returns within one to three years’ time frame though many SIPs are showing significant weekly, monthly as well as daily returns too.

  1. SIPs Have High Flexibility

There is no fear of losing money or being penalized if an investor wants to close SIP. Investors can close SIPs any time they choose to and get the invested amount as well as the applicable returns credited to their accounts. SIPs are becoming more and more flexible by the day with respect to schemes, payment frequency and plan alterability.

The payment frequency can be even weekly or daily; daily Sips are the latest in news. Earlier introduced flexible SIP options include step-up SIP, top up SIP, flexible instalment SIP, trigger-based SIP and pause SIPs. Investors also have the flexibility of choosing from different types of SIP schemes like conservative, balanced and growth SIP schemes.

  1. No Money Is Charged for Opening A SIP

Investors need not pay any money to the mutual fund firm or agent for starting a SIP. The investor just needs to submit the KYC documents and once those are approved the investor can apply for the SIP by filling in the mutual fund and SIP form. Upon successfully being subscribed investor would just need to pay the SIP amount as chosen by the investor.

  1. SIPs Offer High Returns

The average annual returns being made by conservative SIPs is 12 to 15 % which is quite high as compared to recent FD returns. Higher returns to the tune of 20 to 25 % annually or even higher can be attained from growth type mutual funds.

Recently the RBI has cut the FD rates even further and as such they are not capable of generating sufficient returns for the investors and additionally FD returns are taxable above the Rs 2 lakh per annum return limit (form 15 G/H are not accepted by the banks from investors earning more than Rs 2 lakh per year total returns from all FDs). The good news is that several SIP-based mutual fund schemes offer tax exemptions under the Income Tax Act especially those mutual fund schemes which invest in equities as returns from equities are not taxable.

  1. SIPs Can Be Purchased Easily

The investor need not fill up a myriad of documents and make repeated visits to the mutual fund office for purchasing a SIP-based plan. It is easy to purchase SIPs, and they can be purchased through the offline as well as online mode. The only essential criterion is filling with KYC documents with the mutual fund firm for first-time investors. But this is just a first-time requirement and not a repeated requisite. Once investors start to invest in a particular mutual fund firm they can make repeated purchases from the comforts off their homes.

Nowadays purchasing SIPs online has become quite simple. Investors can purchase directly from the mutual fund firm site or through the secure customer portals. Investors can even file the KYC application and documents online.

Benefits of purchasing SIP from secure customer portal overrides purchasing from direct company website in several ways. The essential difference lies in the fact that the former is customer oriented and not product oriented.

Investors can benefit in the following ways by investing through secure customer portal:

  • Comparative information on products and schemes and SIP calculator
  • Ratings of funds based on rating criteria of top rating agencies
  • Selection of firms only authorized by SEBI and RBI
  • Customer portal with accredited Fintech capabilities
  • Customer log in facilities and customized website
  • Investment and transaction records on customized website
  • Regular monitoring of purchased plans and funds
  • Highly secure transaction platform
  • Latest information and updates on investment products
  • Daily, weekly, fortnightly, monthly returns and NAV patterns

Investors can choose the best fit SIP option from the secure customer portal and make it their investment platform.


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