If you are planning to invest in mutual funds, then investing through Systematic Investment Plan i.e. SIP can be a better option. Through this, you can easily create a big fund by depositing small amounts. There are some misconceptions in the minds of people regarding investing money in mutual funds through SIP. We are telling you some important things related to SIP. So that you too can invest in mutual funds without hesitation… Is long term SIP investment a profitable deal? There are many varieties of mutual funds like equity, debt and hybrid funds etc. It is often seen that investing in equity funds proves to be more profitable in the long run. The reason for this is that by doing SIP in equity funds for a long time, the risk of fluctuations in the stock market is reduced. The lows and highs of the stock market create an average return and also get the benefit of compounding. But it is not that there are no mutual funds for short term. Investors can also do SIP in debt or hybrid funds keeping in mind their need and investment period. Is SIP the best way to invest? Perhaps it would not be appropriate to call it the best way of investment, but it can definitely be a good way of investment for people with regular income like salaried people and businessmen who have a fixed income every month. Investing through SIP does not put a heavy burden on the pocket and by continuously investing small amounts, a good amount can be accumulated in the long run. How important is fund selection in SIP? Choosing the right fund for SIP is very important. Not all funds are the same. A mutual fund may have more or less risk and return potential depending on the type of securities or assets it invests in. Also, you should decide the amount of SIP you want to do based on your financial goals. Although SIP of at least Rs 100 per month can be done in many mutual funds, it may not help you achieve your goal. Therefore, invest as much as you can as per your capacity and keep increasing the SIP amount with time. Should one invest in equity mutual funds through SIP? Equity funds means such funds which invest investors’ money in the stock market. Although there is more risk in equity mutual funds, historically it has been seen that investing in equity mutual funds has the potential to give higher returns in the long run. When should one invest money in SIP? SIP is a way of regular investment. You can continue this no matter what the market level is. If there is a recession then you will get more units for the same money and if the market is bullish then you will get fewer units and in the long run the price of your unit will become average. Is it better to invest money in daily SIP or monthly? There is an option to invest daily, monthly, quarterly in mutual funds through SIP. The facts that have emerged in research in the last few years show that in the long run, it does not matter how many times you are doing SIP in a month if the sum of SIPs done throughout the month is the same. When to invest money in SIP to get more benefits? The date on which you do SIP does not make much difference to your returns in the long run. You can invest near your salary date or on days when you are most likely to have money in your bank account. Can I leave SIP midway, what will happen if deposit is not made in any month? If for some reason you want to close your SIP before the stipulated period then it is possible. You can usually withdraw the invested money and if you want, leave the invested amount for growth and just stop further SIPs. Can I invest a lump sum in an already running SIP? Absolutely this can be done. Whenever you have some extra money left, you can invest it in the same folio. An additional lump sum investment in an ongoing SIP can be even more beneficial during a stock market downturn. Is SIP for small investors? Answer – Most people think that SIP is for small investors, this is not true. Most mutual funds do not have an upper limit for SIP installment. Therefore, if you want, you can also start a monthly SIP with a larger amount like Rs 5 or 10 lakh. The minimum amount for SIP installment often ranges from Rs 500 to Rs 1,000 per SIP. In some funds it may be only Rs 100.
