What is SIP? And what are its benefits? What is Mutual Fund SIP in English.
What is SIP? :- SIP is a type of systematic investment plan in which you can invest according to your savings at a fixed time interval. Just like you invest a fixed amount every month like Recurring Deposit (RD), similarly this type of investment in Mutual Fund is called SIP. If you invest in mutual funds through SIP, then you do not need to invest a large amount in it, rather you can invest in it on monthly or quarterly basis by fixing an amount according to your savings.
Full Name of SIP / SIP Full Form In english.
The full name of SIP is – Systematic Investment Plan (Systematic Investment Plan)
You can also start investing through SIP with an amount of Rs.100. This small amount of savings may not seem attractive to you in the beginning but it inculcates a good savings habit in the investors and it also gives you good returns in the long run!
Suppose you invest Rs 2000 in a month SIP and you do this investment for a period of 25 years. If you invest for a period of more than 10 years, then there is a possibility of getting returns between 14 to 20 percent. If we assume at least 15% return for a period of 25 years, then accordingly your amount will increase to Rs 65,68,147! And in this you will invest only Rs 6,00,000 during 25 years!
We calculate this through SIP calculator and see –
|Expected return rate||15%|
|Time period||25 Yr|
Thus you will be surprised how much money can be made with a small savings!
What are the benefits of SIP investment?
( SIP Investment Benefits In english )
If you invest in Mutual Fund SIP for a period of more than 5 years, then you have many benefits in it! Let us know what are the benefits –
1. Very Low Risk
Through SIP, if you invest for a very short period like 6 months to 3 years, then there is a high possibility of risk in it. Similarly, if you invest for a longer period ie more than 5 years, then the amount of risk on such investment is very less and you also get better returns.
2. Small amount investment
The biggest advantage of SIP mutual fund investment is that you can start investing in it with a very small amount. Even you can start investing in it with a minimum amount of Rs 100! Investing in SIPs is done at regular intervals which can easily be afforded by a middle class family. A small investment made by you in SIP can give you amazing results in the long run!
You should keep your income in mind while investing in SIP! You should decide the amount of investment in SIP according to your monthly income. In future, as your income increases, you can also increase the amount of SIP accordingly, that is, you can start investing in SIP of any other company.
3. Easy way to save
SIP is a great and simple way to save money! Currently SIP is very popular among people which encourages them to save. You do not need to invest heavily in this, you can start investing with a very small amount according to your income. So we can say that SIP is a simple way to save!
4. Tax Exemption Benefit
There are many SIP mutual funds which offer tax exemption benefit under Sec.80C on the amount invested. And you get the benefit of tax exemption even after withdrawing the amount invested in it, but there is a lock-in period in such a tax-exempt scheme!
5. Easy to Invest
Investing in Mutual Fund SIP is very easy! You can easily invest in this without any hassle! In this, you first have to choose a plan in which you want to invest, then your bank account is linked to the SIP account. Now whatever date you decide, the bank automatically deducts money from your account and sends it to the SIP account, which is invested by the fund manager in buying mutual fund units. In this, if you want, you can also pay the SIP amount on the fixed date by yourself.
6. Cost Averaging
One of the biggest advantages of investing in SIPs is that you are free from the ups and downs of the market. That is, in this you do not have to worry at all when there are ups and downs in the market! Investing in SIPs is done at a fixed time interval, whenever the market is down, you get more units of the mutual fund and when there is a boom, you get less units! In this way the average price of your mutual fund is not affected by market fluctuations in the long run. And in long term investment, the risk on your investment is very less and you get good returns!
7. Withdraw money from SIP
Another advantage of SIP is that there is no lock in period. The investor can also continue and stop investing in SIP according to his need and goal. Even you can Withdraw some amount in the middle according to the need from the invested amount!
8. Power of Compounding
Compounding means getting interest on interest too! When we invest in SIP, whatever profit or return we get on the invested amount is also invested back by the fund manager. This gives higher returns to the investor.
Some misconceptions related to Mutual Fund SIP (Myths about Mutual Fund SIP in english)
1. There is never any loss in Mutual Fund SIP
There are many such people who just think that investing in Mutual Fund SIPs never results in loss, their belief is very wrong. In this also you can lose if the stock market is going very low and you have invested for a very short period or have invested lump sum. Yes, your long term investment in this can give you better returns!
2. One can take SIP in any mutual fund
It is true that you can run SIP in any mutual fund, but your purpose is not fulfilled by taking SIP in any such mutual fund. For this, you should have a good knowledge of every scheme of mutual fund, then choose a good mutual fund scheme. Suppose you bought SIP of any mutual fund without any thought, which gives an average return of 10 percent, the same other and a good scheme gives a return of 15 percent on the same type of investment, then after a time you will get the amount. There can be a difference of lakhs of rupees! Therefore, you should choose a scheme wisely!
3. Mutual Fund SIP is an investment in itself
In the absence of information, many people ask which SIP they should invest in? For their information, let us tell you that SIP is only a way of investing, whereas you invest in a mutual fund scheme! You can also invest in Mutual Funds without SIP like investing in lump sum which we call Lump-sum investment.
4. The date of your investment is the date of commencement of the SIP
Many people think that the date from which you start investing in SIP is the same investment start date, which is not right for their thinking. As we all know SIP is only one way of investment. So each installment of SIP is a new investment. If you are investing in ELSS through SIP, then keep in mind that each installment of this SIP is a new investment.