Here's all you should know about Systematic Investment Plan

March 04, 2019

know-about-systematic-investment-plan

With more than Rs. 7,000 crores invested every month, Systematic Investment Plan (SIP) is currently one of the most popular investment options in India. One of the biggest reasons for this widespread popularity of SIP Systematic Investment Plan is the convenience with which it lets retail investors invest their money.

Moreover, as compared to most other investment options, SIPs are easy to understand as well. However, while SIPs are convenient and easy, there are a few things that every investor should certainly know before investing. Here are five such important things-

1. Choosing the right mutual fund scheme for SIP

Which is the best SIP plan? This is one of the most common queries among new investors. However, there is no single answer to this question. Every investor, their risk profile and objectives are different. As a result, no single SIP plan is right for every investor.

To select the best, make sure that you first understand your risk profile and objective. All the different types of schemes have different levels of risk and are ideal for different goals.

2. Deciding the SIP Amount

Apart from selecting the right plan, you must also choose the right SIP amount to achieve your objectives. While you can start with just Rs. five hundred per month, pick a reasonable amount that you can easily afford every month and which is in line with your end goal.

If you've just started earning, select the minimum amount that you can afford and then increase the SIP amount at a later stage as your income rises.

3. Choosing the duration of SIP

One of the biggest benefits of SIP investment is that there is no fixed duration for which you need to continue the SIP. While it is recommended that you should invest as long as possible, you can pause and even resume your SIP as and when you like.

This means that you can invest in mutual fund schemes through SIP for 15 years, 10 years, or even 1 year.

4. Starting a SIP

In the past, you were required to get in touch with an AMC (Asset Management Company) agent to invest in mutual funds through SIP. However, thanks to internet banking, this can now be done online. How to open SIP account online? Just visit the official website of your AMC (Asset management company) and register for the same.

You'll be required to fill the KYC and provide some additional details to open a SIP account online instantly.

5. Taxation on SIPs

SIP gains are taxed based on the holding period and the type of scheme you have invested in. Every SIP is treated as a fresh investment for tax purposes. For instance, gains of up to Rs. 1 lakh from an equity fund after a year are tax-free but if the amount is higher than Rs. 1 lakh, capital gains tax at 10% is applicable.

Similarly, if you redeem the units within one year from the date of investment, capital gains tax of 15% is applicable.

Being a savvy SIP Investor

It is only by thoroughly understanding the working of SIP plans and mutual funds that you can take the right investment decisions. While the basics of what is SIP plan and how it works are discussed above, focus on educating yourself to be a savvy investor.

The internet is now flooded with all the information you need to begin your SIP journey. Official websites of top AMCs are the best places to find reliable information with regards to SIPs and mutual funds.

 

DISCLAIMER

The contents of this document are meant merely for information purposes. The information contained herein is subject to update, completion, revision, verification and amendment and the same may change materially. The information provided herein is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person‘s nationality, residence or otherwise) be contrary to law or regulation or would subject lClCl Bank or its affiliates to any licensing or registration requirements. This document is not an offer, invitation or solicitation of any kind to buy or sell any security and is not intended to create any rights or obligations. Nothing in this document is intended to constitute legal, tax, securities or investment advice, or opinion regarding the appropriateness of any investment, or a solicitation for any product or service. Please obtain professional legal, tax and other investment advice before making any investment. Any investment decisions that may be made by you shall be at your sole discretion, independent analysis and at your own evaluation of the risks involved. The use of any information set out in this document is entirely at the recipient’s own risk. The information set out in this document has been prepared by ICICI Bank based upon projections which have been determined in good faith by lClCl Bank and from sources deemed reliable. There can be no assurance that such projections will prove to be accurate. lClCl Bank does not accept any responsibility for any errors whether caused by negligence or otherwise or for any loss or damage incurred by anyone in reliance on anything set out in this document. In preparing this document we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us or which was otherwise reviewed by us. Past performance cannot be a guide to future performance. ‘lClCl’ and the ‘I-man’ logo are the trademarks and property of lCICl Bank. Misuse of any intellectual property, or any other content displayed herein is strictly prohibited.

Comments()