Systematic Investment Plan (SIP) is amongst the most searched term on Google. It is a plan where the investors have to deposit a certain amount of money at a regular interval. SIP Mutual Fund is the one that averages your purchase costs. SIP is often preferred over other investment plans because it generates a discipline in the investor to save money. It also includes an added benefit of compounding i.e., when the amount is invested for a longer period of time it earns returns. Returns on this investment are said to be compounding.
A new investor can start investing in mutual funds via SIP with a minimum amount of ₹500. Investors can customize their investment plan in SIP as per their convenience. There are various plans available such as monthly, bi-monthly, fortnightly and also, to increase the investment amount periodically. There is also a form of SIP known as ‘Alert SIP‘, in which the investor is sent an alert to buy more when the market is down. Another such form is Perpetual SIP where the end date of SIP is not needed to be chosen by the investor, he can send a written communication to the fund house once his goal is met.
SIP Mutual Funds are becoming popular with rising awareness among the people and the returns generated from them. However, one should know about the basic terms and conditions of investments before investing his/her hard-earned money into it. Every SIP invests its money in various companies of different sectors. As a precaution, the investor should check the profile, of these companies chosen. Mutual funds also charge some fees for management of your money, which includes fund management fees, agent commission, registrar fees, etc. This fee is called expense ratio. These small costs have a large impact on your return.
Mutual fund companies such as Quantum are coming up with various services such as the path to profit, Distribution centre etc. in order to educate the investors in this field. Once the investor knows about the pros and cons of the investment it will save him from various risks associated with it.