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Systematic Investment Plan (SIP) is a method of investing where investor contribute a fixed amount at regular intervals. This approach helps in building discipline saving habit and allows investor to benefit from the potential growth of the market over time. SIP also help mitigate market volatility through rupee cost averaging, as investment are made at different market levels .
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How does SIP investment work?
An SIP works like a recurring investment, where the amount is auto-debited from your bank account and invested in the mutual fund of your choice. Once the amount is deposited, you get a certain number of units of the mutual fund scheme where you have invested. The number of units depends upon the Net Asset Value (NAV) of that particular scheme for that particular day. SIPs provide investors with a flexible investment approach. They have options to adjust their investment amounts based on their goals and risk profile. This flexibility enables investors to increase or decrease their SIP contributions with great control.
Advantages of Investing in SIP Mutual Fund
Investing in a Systematic Investment Plan (SIP) offers numerous advantages for individuals seeking to build wealth systematically and achieve their financial goals:
Disciplined Investing: SIP investment encourages investors to invest a fixed amount in a disciplined manner, which will help them in savings and avoid the temptation of the market. With a consistent investment approach, investors can have a reliable investment habit, which is necessary if they plan to build their wealth for a long-term goal.
Cost Efficiency: SIPs make mutual fund investments accessible to several investors due to their minimum investment threshold. By breaking down investments into regular payments, SIPs reduce the impact of market fluctuations associated with cost inflation, making investments affordable.
Power of Compounding: SIPs use the power of compounding and allow investors to reinvest earnings over an extended period. This compounding effect can be the best option for potential growth over time, enhancing return on investment.
Flexibility: SIPs provide investors with flexibility so that they can start, pause, increase, or decrease their investments based on their financial circumstances and market conditions. This adaptability ensures that the financial goals remain the same and don’t change due to circumstances.
Diversification: SIP mutual funds provide access to a diversified portfolio of assets, spreading investment risk to other securities. This diversification allows investors to escape market volatility, enhancing their portfolio stability and returns.
Features of an SIP Investment?
SIP offers a variety of features, making it an attractive avenue for mutual fund investments.
Regular Investment – Weekly, monthly, or quarterly options promote disciplined saving and investing habits.
Cost Averaging – SIPs help mitigate the effect of market volatility through rupee cost averaging
Affordable Investment Initiation:Â SIPs allow investments starting with as little as Rs. 500 per month and accommodate gradual increases over time.
No Maximum Investment Limit:Â Investors can contribute any amount they choose, with no stringent upper limit.
Things to consider before investing in SIP Mutual fund
Investment Horizon Determination: Always evaluate your investment horizon, and ensure a balance between short-term liquidity needs and long-term financial objectives.
Cost Analysis and Budgeting: Evaluate the total cost of SIPs, including management fees and taxes, and ensure it aligns well with your financial plan.
Fund Selection Criteria: Research and select SIP Mutual Funds by considering historical performance, expense ratio, and fund manager expertise.
SIP Investment Amount Planning: Determine the optimal investment amount considering your financial capacity, income, and expenses.
Regular Monitoring and Adjustment: Commit to monitoring SIP performance periodically and adjusting to stay aligned with your desired goal.
Financial Goals Assessment: Know your investment plan and objectives, such as creating a retirement plan or making real estate purchases.
Risk Tolerance Evaluation: Assess your comfort level with your risk tolerance and plan the allocation among equity, debt, and hybrid SIPs accordingly.
How to invest in SIP?
Investing in a Systematic Investment Plan (SIP) is a smart way to venture into Mutual Funds (MFs) and gradually build wealth. Signing up for an SIP is a simple and free process. Many banks offer convenient plans for automatic deposits into MFs. Starting your SIP journey not only leads to financial discipline but also allows you to benefit from the power of compounding over time. Here is how you can start investing in an SIP:
Keep the following documents handy
- ID proof
- PAN Card
- Address proof
- Valid bank account details
- Passport or driving licence copy
Ensuring compliance with the latest KYC norms set by the government is essential for a hassle-free investment process.
Complete your KYC
Completing KYC requirements is important for any financial investment. It can be completed at authorised banks, post offices issuing prepaid cards or online. The application form will require personal details and a declaration of your investment intentions.
Register for an SIP
Choose a reputed Indian broker or financial advisor to register for an SIP. This step opens the door to various investment plans tailored to your unique needs and risk tolerance.
Choose the right plan
Selecting the right SIP is important for decent returns. Consider factors such as risk appetite, desired units and your investor profile. Evaluate different plans, their unique features and benefits based on your financial goals.
Determine the investment amount
Decide the monthly or weekly investment amount based on your financial goals and liquidity needs. This step ensures a disciplined and consistent approach to wealth creation
Pick the SIP date
Select a convenient date for your SIP investments. Enjoy the flexibility to choose multiple dates for various SIPs within a month, customising the plan to fit your financial calendar.
Submit your form
Once you have selected your MF company and SIP, initiate the SIP by submitting the form. It can be done online through your Demat Account or offline through your bank.
How to submit the form online?
If you are a new investor, create a new account or log in with your credentials if you are an existing user
Fill out the KYC details
Complete the online payment.
How to submit the form offline?
Fill out the application form along with the KYC details
Fill out the Auto Debit Form (ADF) and submit a cancelled cheque
Submit all the required identity proofs such as utility bills, address proof, etc. at any ICICI Bank Branch.
Start your SIP today and take a significant step towards achieving your financial goals!
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Are SIP Investments taxable?
Generally, SIP investment profits are taxed differently for equity and debt funds. For equity funds, gains up to Rs. 1 lakh after a year are tax-free, while gains above Rs. 1 lakh come with a 10% capital gains tax if holding period is more than three years. If units are redeemed within a year, a 15% capital gains tax applies. Debt funds follow indexation benefits for long-term capital gains tax, while short-term gains are taxed as per the individual's income tax slab.
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 SIP Investment FAQs
The minimum amount to invest in an SIP may vary depending on the Mutual Fund. Typically, the minimum amount can range from as low as Rs 100 to Rs 500 per month.
Investing in SIP Mutual Funds provides several benefits, including disciplined investing, rupee cost averaging, power of compounding, flexibility and diversification. SIPs allow investors to start with a small amount, reduce the impact of market volatility and beat inflation. It has relatively higher liquidity as compared to other financial instruments. So, it generates higher returns in the long run.
