SIP, or Systematic Investment Plan, is gaining popularity among investors seeking to accumulate wealth. However, there are still myths and misconceptions that surround the topic that are keeping investors on the sidelines.
For instance, concerns such as SIP not being safe or the SIP calculator being accessible only to experts, etc., create doubts in the mind. Clearing up such misconceptions will help investors make an informed decision.
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Below Are The 13 Things You Need To Know About Systematic Investment Plan
1. What Does SIP Exactly Mean?
SIP stands for Systematic Investment Plan; it is an investment method in which a fixed amount is invested towards your selected mutual fund plan. This amount is debited monthly from your bank account for investment, accumulating and growing over time.
2. Is SIP Safe or Not?
SIP is a safe method to invest in a mutual fund. Opting for a lump-sum investment exposes you to the risk of market fluctuations.
3. Can SIP Be Stopped?
Yes, SIP can be stopped at your discretion. After stopping it, you can either choose to redeem your mutual fund money or stay invested.
4. Are SIP and Mutual Funds the Same?
SIP is a method to invest in mutual funds. In SIP, you invest in mutual funds in a smaller amount on a regular basis.
5. Are SIP Returns Taxable?
It depends on the type of mutual fund you invest in. Equity mutual funds are tax-free after a year of investment, while debt funds are taxed if you redeem them after 3 years of investment.
6. Can I Reduce or Increase the SIP Amount?
The process to make this change is quite complicated. Instead, there is another solution: you can start a new SIP under the same plan with an increased/decreased amount of your choice.
7. Is There Only One Type of SIP?
No, there are different types of SIPs you can invest in such as flexible SIP, step-up SIP, trigger SIP and perpetual SIP.
8. Is There a Lock-In Period on SIP?
It completely depends on the type of mutual funds you invest in. If you invest in an open-ended mutual fund, there will be no lock-in period.
9. Can I Start an SIP Online?
Yes, you can easily start an SIP online. You need to visit your trusted financial broker’s website and use their SIP calculator to check your investment amount and returns. After that, buy your funds from them.
10. Which is Better, SIP or RD?
SIP can provide better returns over the long term; the mutual funds you select decide the returns you will receive. With equity, you get higher returns for high risk, while debt is considered safer. So, in RD (Recurring Deposit), the amount of return remains the same.
11. Is There an Exit Load on SIP?
The exit load depends on the mutual fund; if the mutual fund mentions an exit load, then there will be an exit load.
12. Is SIP Good for the Long Term?
Yes, investment in SIP for the long term is the best financial choice. With small investments, you can accumulate great wealth over time.
13. Which SIP Should I Invest In?
It depends on your willingness to take risks; there are small and mid-cap mutual funds with higher risk. Then there are large-cap mutual funds with moderate risk.
Summing Up
After getting answers to all these common mutual fund questions, you can now make an informed decision about your investments. Just make sure you use all the tools, like the SIP calculator, to get as accurate a result as you can get.
