SIP

Secure Your Financial Future: A Guide to SIP with Fincart

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What is SIP Investment?

SIPs, or Systematic Investment Plans, are widely favored for investing in Mutual Funds. They promote financial discipline and help in growing wealth over time. Through SIPs, you can begin with modest amounts and steadily build up savings in an organized way. It’s a methodical approach where you invest a fixed sum regularly, usually every month. Many prefer SIPs for investing in stocks and Mutual Funds as they enable market participation while reducing risk.
 
Sip money grow

Understanding SIP Example

Suppose you decide to invest Rs 5000 monthly in a mutual fund through SIP. The duration is one year. In the first month, you invest Rs 5000 at the prevailing Net Asset Value (NAV), let’s say it’s Rs 10 per unit. So, you purchase 500 units of the fund (Rs 5000 / Rs 10 = 500 units).

Over the next 11 months, you continue to invest Rs 5000 each month. The number of units you purchase each month depends on the NAV at that time. For example, if the NAV increases to Rs 12 in the second month, you’ll buy approximately 416.67 units (Rs 5000 / Rs 12 = 416.67 units).

By the end of the 12-month SIP period, you’ll have accumulated units in the Mutual Fund each month, based on the amount invested and the NAV at that time. Over the course of the SIP, your total investment would be Rs 60,000 (Rs 5000 per month for 12 months).

The NAV of the Fund may fluctuate over the SIP period due to market conditions.

Due to the rupee cost averaging effect of SIP, you would have bought more units when the NAV was lower and fewer units when the NAV was higher. This helps in averaging out the purchase cost over time.

How Does Systematic Investment Plans Work?

Here’s how SIPs work:

Types of SIP Investment

Here are the different types of SIP investments available:

Top-up SIP- With Top-up SIP, investors have the option to increase their investment amount periodically. This flexibility is beneficial for investors who experience increases in income or have surplus funds available for investment.

Flexible SIP- Flexible SIP offers investors the freedom to adjust the investment amount according to their cash flow needs. Investors can increase or decrease the investment amount as per their financial situation or changing investment goals, providing greater control over their investments.

Perpetual SIP – Unlike traditional SIPs, which typically have a fixed investment period of 1 year, 3 years, or 5 years, perpetual SIPs do not have a mandate end date. Investors can choose to continue their investments indefinitely, aligning with their long-term financial goals, without the need to renew or set a new mandate period.

Benefits of Investing in SIP

Investing in SIPs offers several benefits:

-> Discipline: SIPs promote regular investing, fostering financial discipline.

-> Affordability: With low entry barriers, even small investors can participate.

-> Rupee Cost Averaging: SIPs mitigate market volatility by averaging out purchase costs over time.

-> Flexibility: Options like Top-up SIPs and Flexible SIPs cater to varying investor needs.

-> Long-Term Growth: SIPs align with long-term wealth accumulation goals.

-> Professional Management: Access to professionally managed mutual funds diversified across sectors.

-> Convenience: Automated investments streamline the process, requiring minimal intervention.

Overall, SIPs provide a systematic, convenient, and potentially rewarding approach to wealth creation while managing risk effectively.

How to Choose the Best SIP Planner/Advisor?

Track Record: Look for the best SIP planner with a proven history of expertise and integrity in financial planning.
Experience & Qualifications: Consider their years of experience and professional qualifications.
Certifications: Ensure they are certified by reputable regulatory bodies.
Recommendations & Reviews: Seek recommendations from trusted sources and check client reviews for credibility.
Understanding of Goals: Ensure the planner understands your financial goals, risk tolerance, and preferences.
Transparency: Look for transparency in their fee structure.
Personalized Approach: Prioritize planners who offer tailored investment strategies.
Comprehensive Support: Choose an advisor who prioritizes your financial well-being and offers comprehensive support.

Why Choose SIP for Investment?

Systematic Investment Planning or SIP is a disciplined approach to the investment that doesn’t time the market:
 

Low initial investment

Convenient mode of investment

Power of compounding

Rupee cost averaging

Things to Consider Before Investing in SIP

Systematic Investment Planning Process

FAQ's on SIP Investment

SIP or Systematic Investment Planning is considered as an ideal way for investing in mutual funds. With SIP, an investor can invest the amount they want to invest monthly with an auto-debit facility. For a person investing in equity funds and looking for a long-term investment, SIP is highly recommended. Not only this, SIP investment works well in a falling market. This is because the investor can accumulate a large number of mutual fund units when the price is low. Lump Sum investment itself means having a huge amount of corpus. This type of investment suits investors who want to invest for the short-term in debt mutual funds.

There are ample benefits you can get investing in mutual funds via SIP: 

  • Power of compounding
  • It’s convenient
  • Rupee Cost Averaging
  • Returns 2x higher than RD & FD
  • Serves as an Emergency Fund 
  • Invest with discipline

Yes, you can stop your SIP if you wish to. Unlike other investment avenues like FD or RD, you can stop SIP anytime you want. You can either choose to redeem your money or stay invested in the fund.

SIP is merely a way to invest in a mutual fund. Every month you invest in a mutual fund via SIP

There is a possibility that your bank will charge you a Direct Debit Failed Fee. To find out the exact amount, contact your bank.

NAV represents the per-unit value of a mutual fund scheme on a specific date. It is calculated by dividing the total net assets of the fund by the total number of units outstanding. For SIP investors, NAV is important because it determines the price at which units of the mutual fund are bought or sold.

No, not all SIPs are tax free. Only investments made in Equity Linked Saving Schemes (ELSS) are eligible for a tax deduction. If you use SIP to invest in ELSS, you can save taxes under section 80C of the Income Tax Act, up to Rs. 1.5 lakh per year.

Yes, you can withdraw from a SIP at any time. SIPs offer flexibility in terms of withdrawals, allowing investors to exit their investment whenever they choose. However, it’s important to note that while you can stop investing in a SIP and withdraw your investment, the timing of the withdrawal may impact your returns.

The full form of SIP is Systematic Investment Plan.

One-year SIPs are becoming increasingly popular among young investors due to their potential for generating favorable and swift returns. Typically, with the aid of a one-year SIP, investors can anticipate returns on investment ranging from 4.2% to 6.2%, varying according to the composition of their fund portfolio.