SIP What, when, where, how everything you wanted to know about SIP
02 What is SIP? SIP stands for Systematic Investment Plan. SIP is an organized way of investing regularly in a mutual fund. Many times we don't have large amounts of money to invest. When you set up an SIP with any mutual fund, your account is debited a fixed amount every month. This amount is invested in a mutual fund of your choice. Over a period of time, your investments accumulate and keep growing.
03 Is SIP safe or not? SIP is a very safe method to invest in mutual funds. You do not need to worry about timing the market when investing via SIP. In SIP, you invest a small amount of money every month. In some months, the price will be high while in some months, the price will be low. If you consider the long term, the price you pay will be an average of high and low.
04 Are SIP returns taxable? Depends on the type of mutual fund you invest in and when you redeem your investment. Equity mutual fund returns have a tax on them if redeemed after a year of investment. If you redeem before a year, you will have to pay a tax of 15% on your gains. Debt mutual funds, on the other hand, are taxed at a rate of 20% with indexation benefit. If you redeem after 3 years since investment, you have to pay no tax. READ MORE
05 Can SIP be stopped? Yes, you can stop an SIP whenever you wish to. Unlike fixed deposits (FD) and recurring deposits (RD), you can stop an SIP any time you want. After stopping paying for an SIP plan, you can either choose to redeem your money from the mutual fund or continue to remain invested in the fund.
06 Can SIP save tax? You can save tax under Section 80C by investing in ELSS mutual funds. To take benefit of ELSS mutual funds via SIP, make sure the total of all your SIPs in a financial year is 1.5 lakhs. Investing more than 1.5 lakh won't give you any additional tax benefit. You can however still invest in an ELSS mutual fund if you feel it is a good investment. READ MORE
07 Can SIP amount be reduced or increased? No, it is not possible to do so. There is a solution though. If you absolutely must increase or decrease your SIP amount, you can simply cancel your existing SIP and start a new SIP in the same mutual fund. The new SIP can then be set with a higher or lower amount.
08 Can SIP be started online? Yes, you can easily start an SIP online. To start an SIP online using Groww, make sure you have a signed up on groww.in. Upload necessary documents (PAN, address proof, and bank statement) and then choose a mutual fund you want to start an SIP in. Go to the mutual fund page on groww.in and follow instructions.
09 Does SIP have a lock in period? Only if you invest in close-ended funds. Mutual funds that have lock-in periods are called close-ended mutual funds. If you are investing in an open-ended mutual fund, there will be no lock-in period for your SIP. It completely depends on the mutual fund you invest in.
10 Does SIP have exit load? The exit load of an SIP depends entirely on the mutual fund If the mutual fund specifies an exit load for a period, then there will be an exit load on the SIP also. Most equity funds have an exit load of 1% if redeemed before a year from investment and no exit load if redeemed after a year. The exit load is calculated upon the value being redeemed. READ MORE
11 Is SIP better than RD? SIP has the capability to give much higher returns than RD. Unlike RD, the rate of return isn't fixed in case of mutual funds. Debt funds usually give much better returns when compared to RD and are considered low risk too. If you can take more risk, you should try setting up and SIP in higher risk equity mutual funds.
12 Is SIP good for long term? Yes. In fact, it is better to invest in SIP for the long term. Instead of waiting and accumulating money to invest, you start investing whatever amount you are able to save. This way, your money is always invested. Not just that, by investing for the long-term, you are ensuring that short-term market volatility does not affect your investment.
13 Is SIP and mutual fund the same thing? SIP is a method used to invest in mutual funds. You can invest in mutual funds in two ways: lump sum and SIP. When you invest lump sum, you put in a large amount of money in a mutual fund in one go. In SIP, you invest smaller amounts of money on a regular basis - usually every month.
14 Which SIP to invest? That depends on your needs. If you are willing to take risks, you can check out small and mid cap mutual funds. On the other hand, if you want moderate risk, you can take a look at large cap mutual funds. You can also check out debt mutual funds if you want to be exposed to very low risk. READ MORE
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