Convert small investments into a big one with SIP mutual fund

Systematic Investment Plan (SIP) is a mechanism by which you can invest in mutual fund schemes. As per the SIP, an individual is required to pay a fixed amount be it monthly, quarterly or annually for a certain time period.

SIP is envisaged to convert small investment into a big one over a period of time. As the amount is constant and invested regularly, you get extra units in the declining market and lesser units when the value remains high. SIP helps you deal with the market uncertainties and thus proves to be an affordable option for the investors.

Perfect time to take SIP

SIP mutual fund will benefit you as long as markets remain volatile or exhibiting the downward trend. Moment, the market sets into a bull run and starts rising, SIP won't be of much avail and may offer you less returns compared to the lump sum investments.

Benefits of SIP

  • SIP is pocket-friendly as it allows you to make smaller amount of investment every month rather than a lump sum at one go
  • SIP offers you the advantage of rupee-cost averaging concept as it enables you to purchase more units with the downturn in the market and lesser units when the market is going up
  • SIP offers a convenient medium of investment as you are required just to fill up the enrolment form, submit it along with a cheque deposited on the date sought by the mutual fund. Subsequently, you will get units and a notification for the same will be sent to you.

Lesser known things regarding SIP

Top up facility

Suppose you are a salaried employee and want to invest more on your existing SIP each month as a result of hike in your emoluments, you can get the top up on the SIPs. You are required to fill up the form and tell to your fund house of the amount you would like to add to the existing SIP. Fund houses offering top-up on existing SIP include ICICI Prudential AMC, Birla Sun Life AMC, etc.

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Pause SIP temporarily

In case you feel like not able to pay the SIP for a certain period of time due to sudden rise in expenses, you can get a pause on the SIP. Generally, people stop the existing SIP and then start the new one later on. Doing the same will require you to complete the same old formalities of filling in the form, submit the same with a cancelled cheque and then wait for a month and a half for the SIP to start. But, things have changed now as fund houses like ICICI Prudential AMC provide a facility titled SIP Pause, a scheme by which you can pause the SIP for a period of up to 3 months. You are required to select the number of months for which you want the SIP to be paused at the time of giving the pause application, which must be submitted two working days prior to the date of SIP.

Other facilities

Asset Management Companies (AMCs) like Kotak Mahindra AMC, Reliance AMC and Birla Sun Life AMC offer insurance along with SIP schemes. Also, there is a growing trend of flexi SIP by which you can alter your amount in an SIP programme each month.

History of SIP in India

The history of SIP in India is two-decade old when Franklin Templeton India Asset Management (India) Ltd launched the same along with Templeton India Growth Fund in 1996. The SIP allowed investors to make a fixed sum of investment each month. Soon, other fund houses began to offer SIPs in their equity funds. At the start, investors were made to make payment via post-dated cheques. Subsequent to the arrival to electronic clearing system (ECS) facility, AMCs began to take bank mandates from investors. Currently, most AMCs do not entertain post-dated cheques and insist on ECS, a facility by which money is automatically debited from the account as per the standing instructions.

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Fullerton India14.00% - 33.00%
HDFC Bank11.25% - 21.50%
ICICI Bank10.99% - 18.40%
IndusInd Bank10.99% - 16.00%
Kotak Bank10.99% - 20.99%
RBL13.00% - 18.00%
Standard Chartered Bank12.00% - 17.00%
Tata Capital10.99% - 18.00%
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LIC Housing8.70% - 9.05%
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Axis Bank8.80% - 9.05%
Citibank9.00% - 9.85%
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Kotak Bank8.90% - 8.75%
DHFL9.05% - 9.95%
Reliance Home Finance8.75% - 14.00%