Skip to main content

Mutual Funds: What Is A Systematic Investment Plan (SIP)?

SIP is a way of investing regularly in mutual fund schemes. Through this, you can invest a fixed amount (as low as `100 and in multiples thereafter) monthly or quarterly for a pre-determined period in a fund. Units are allotted to you at the net asset value existing on the day of investment. Besides mutual funds, some brokerages and gold exchange-traded funds have also started offering this option. With brokerages, you can dedicate a specific amount towards buying pre-decided scrips in tranches each month.

How to get started?

First, select the scheme, investment amount and the time frame. Next, approach a mutual fund distributor or the fund house with your application and know-your-customer (KYC) documents. You can also invest through an online mutual fund portal. Typically, fund houses mandate investment for a minimum of six months or two quarters. So, you can either give post-dated cheques for the period or opt for the auto debit/electronic clearing system option. Remember, while you can start investing on any day of the month, you will have to pick a date for subsequent investments. That is, each mutual fund specifies dates for SIPs, like the first, seventh, tenth of each month.

What are the advantages?

SIPs are highly recommended as they inculcate a habit of disciplined and regular investing. If you choose the auto debit option, the process is completely hassle-free. The most important advantage is that they follow the rupee cost averaging principle. Say, you invest `1,000 a month. And, the price of the chosen scheme unit is 10 in the first month. You will get 100 units. Next month, the unit price falls to `9and you are allotted 111 units. In the third month, the price drops further to `8, getting you 125 units.

Thus, by investing `3,000 over three months, you have got 336 units. In contrast, had you invested the entire amount in the first month itself, you would have garnered just 300 units. In case of SIPs, the average unit cost is about `8.9 as compared to `10 in case of lump sum investments. Thus, SIPs help lower the average unit cost and buy you more units. All, by eliminating the need to time the market.

How are the investments taxed?

If units of an equity-oriented fund are held for more than a year, any gain arising on their sale is considered as long-term capital gain (LTCG) and, hence, is tax-free. However, if you sell them off within a year, gains, if any, are considered as shortterm capital gains and taxed at a flat rate of 15 per cent. The same rules apply to SIPs accompanied by the first in-first out principle. From a taxation perspective, each SIP instalment is considered a separate investment and must be held for at least a year to be eligible for the LTCG benefit.

 

-----------------------------------------------------------------

 

Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in L&T Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

 

 

Popular posts from this blog

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...
Read more

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...
Read more

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...
Read more

Kisan Vikas Patra - KVP

  Kisan Vikas Patra (KVP) First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months). KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit. KVPs are available at all departmental post offices across India. These certificates can be prematurely encashed after 2 ½ years from the point of issue. KVPs can be transferred from one individual to another and from one post office to another. ----------------------------------------------------- Inve...
Read more

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now