What is SIP & How does a SIP work?
SIP is an investment plan where you can get both flavours of Mutual Fund and Regular Investing.
Systematic investment plan (SIP) helps to have a saving on regular basis. A small amount can be invested regularly to the mutual fund. To make it simple it is like having a deposit with a bank where you put in small amount every month and the money grows as per the equity market movements.
All types of equity funds, debt funds, and balanced funds offer SIP. Some of the SIP have entry and exit loads.
Advantages of SIP
The major attraction of SIP is the split of investment funds. An investor can put his investments on monthly/ regular basis. Where as in Mutual fund investment the investor have to put a lump sum amount. SIP lowers the burden on investor like a salaried employee who can put certain amount of his earnings to the equity market.
Recommended Read : SIP vs Mutual Fund
How much should you invest in SIP?
You do not have to invest a huge amount. Each fund has their own minimum amount. You could invest an amount as little as Rs 100 or Rs 500 depending on the fund. You will have to put the amount every month into the mutual fund scheme at the prevailing Net Asset Value subject to the applicable load. The advantage of this system is to have a saving on regular basis and also to build up an investment.
SIP may have to be done once in a month or once in 6 months depending on the fund. You will have to pick a date provided by the fund for the SIP to be done and on that particular date chosen by you, the amount to be invested in the fund should be credited to your mutual fund.
Duration of Investment in SIP?
Investment through SIP should be done with a minimum of 2 years of time frame. However, you will have to mention the duration you want to invest in SIP. If at any time you would like to discontinue SIP, then you will have to inform the fund 15 days prior to the payout. Your SIP will then be discontinued and the money can be withdrawn as and when you require.
In India SIP is offered by most of the famous Asset Management companies like :
SBI, ICICI, UTI, SUNDARAM HDFC Birla Kotak TATA Reliance etc.
