Hello Readers!!
SIP (Systematic Investment Plan) in Mutual funds was introduced way back in 1993 in India by Franklin Templeton Mutual Funds. Since then investors started taking interest in it. However, its popularity has accelerated more in the last some years.
In fact, as per the reports, the SIP inflow that slowed down in June 2020, has again geared up and has shown a good surge in the month of March 2021. According to the Association of Mutual Funds of India (AMFI), inflows into MFs via SIPs stood at Rs 9182 crore last month, March 2021.
This data clearly shows how deeply the concept of SIP’s in mutual funds has attracted the investors towards Mutual Fund Investment sector.
Here let us know about some unknown facets of SIPs and how investors can use these installments to their advantage.
To Start An SIP, You Do Not Need To Be Rich!!
The cost of shares of big companies is high, which makes it tough for normal middle-class people to take part in share market investment. But with SIP’s in mutual funds, they can easily indirectly take part in investing in these big company stocks.
Did you know just one share of MRF costs Rs 81,884? One share of Honeywell Automation is valued at Rs 43312. So, how do you go about buying these ‘pricey’ stocks?
In mutual funds, an individual can start investing with as small amount as Rs 5000 monthly, in fact, there are some mutual fund houses that call for investing in mutual funds via a SIP of Rs 500 per month or even Rs 100 per month.
You Can Withdraw Your Money Without Stopping Your SIP!!
SIP’s in a mutual fund, allows for withdrawal from the accumulated amount that too without stopping your SIP. Generally, fund houses work on the basis of the FIFO (first in first out) method for withdrawal. This method is also beneficial for the investors as it saves you from the short-term capital gain tax.
If you are investing in an open-end mutual fund scheme you can withdraw your money anytime, and for that, you don’t need your SIP investment.
Not only you can withdraw, but there is one more option in SIP’s that make it more efficient in your financial emergency situation also. Like if you lost your job or you have some other big financial work, due to which you won't be able to pay your SIP installment for the next few months, you don’t need to stop your SIP, you can pause it instead!
You have to fill up a simple form and there are options. You can pause SIPs for 3-6 months depending on what you wish. The maximum time fund houses now allow is a six-month window.
You Can Invest In Debt Funds Via SIP!!
SIP investment is not only meant for Equity mutual funds, but you can also invest in debt funds or liquid funds via SIPs. There are many investors that think that SIP investing offers good investment when carried for long-term thus one can invest via SIP only in long-term investing Equity funds. However, this is half true. SIP offers a good return when carried for the long term but investors can invest in debt funds via SIP also and can take out their money anytime they require.
ELSS SIP’s Are Locked In!!
We all know that lump-sum investment in ELSS (Equity Linked Saving Scheme) is locked in for three years, which means one cannot withdraw their amount before a period of three. Well, similar is the case with SIP investment in ELSS funds.
In fact, in ELSS your each SIP installment is taken as a fresh purchase, and each of your SIP is locked for three years that start right from the date of its deposition. Like if you start a SIP in ELSS and your installment was deposited on 1st May 2021 then it will be locked till 1st May 2024. Similarly, if you deposited your second SIP installment on 1st June 2021 then it will be locked till 1st June 2024, and so on.
In other words, if you wish to withdraw the entire accumulated amount in your ELSS, you can only do so after all your SIP installments complete three years’ lock-in.
Keep reading for more updates on Mutual Fund Investment!!
For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).