How to Invest in Mutual Funds through SIP online
A penny in the piggy bank everyday!Yes, this is what you did in your childhood and now that you are earning,use the same principle when you invest in mutual funds with a Systematic Investment Plan or SIP
How to invest mutual funds systematically
A Systematic Investment Plan is nothing but investing a specified amount of money at regular intervals (daily, weekly, monthly) into a mutual fund of your choice.This systematic way of investing in mutual funds helps you achieve your financial goals and create wealth in a safe and steady manner.
The two biggest benefits of SIP are that they bring discipline into investing and reduce the average cost of buying a mutual fund unit in volatile markets. While SIPs are commonly used in the equity markets because of their volatility, they can be equally applied to other assets such as debt funds, gold funds etc.
SIPs help you invest in mutual funds easily and conveniently. Here’s how:
Transact with ease and without hassles
Remembering monthly payments can be a hassle – be it a bill or an investment or an insurance premium. SIPs are easy to manage (just instruct your bank once and payments will be automatically made).
Get your money out when you need
Mutual funds are highly liquid. And while you invest in regular instalments, you can withdraw the money whenever you need it in one go.
Plan and celebrate each stage of your life
SIPs work wonder when coupled with life stage planning of investment goals. There are specific plans for children benefits, for retirement benefits and so on.Invest in mutual funds vian SIPs and experience the joys of financial freedom at each stage of life,
Cover the risks
‘Mutual fund investments are subject to market risks’, is a commonly heard term. But SIPslower the risk because youare spreading your investments over time and have a longer investment horizon. Usually, longer the holding period, the lowerthe risk of making a loss.
SIPs are one of the best ways of investing in mutual funds:
- You may choose any mutual fund scheme to open an SIP
- You get to decide the tenure and can issue a direct debit mandate to your banks so you don’t have to worry about remembering to invest
- You may stop anytime and withdraw as and when you need funds
- You can change the SIP amount at any time to suit your cash flow needs
- The longer you contribute to an SIP, the larger will be your corpus.The magic of compounding (when your returns begin earning returns) works wonders over a longer duration.
- In an SIP, you end up buying more number of units when the markets fall and fewer units when they rise. This behaviour enables you to acquire units of a mutual fund at a lower average price. The phenomenon is called rupee cost averaging or purchase price averaging.
- SIPs also dissuade you, though indirectly, from splurging money on extravaganzas and impulses.
- If the SIPs are in equity and equity-oriented funds, you will benefit from lower capital gains tax on the sale of the units. If you have chosen a dividend plan,you will receive regular income which is tax exempt in your hands upto Rs 1 lakh per financial year.If the SIPs are in growth plans instead of dividend plans, you stand to reap the benefit of cost indexation (is an inflation-adjusted method of calculating tax) at the time of redemption.
- SIPs can be easily converted after few years into SWPs – Systematic Withdrawal Plans which may help you in your retired life.