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Systematic Investment Plan (SIP) in Mutual Funds

How to do SIP in Mutual Funds

A SIP is a flexible and simple investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme. You are allocated a specific number of units based on the continuous market rate (called NAV - Net Asset Value) for the day.

Every time you spend money, more units of the scheme are acquired at the market rate and added to your account. Hence, units are purchased at different rates. The investors avail from Rupee-Cost Averaging and the Strength of Compounding.

Rupee-Cost Averaging

With volatile markets most investors are skeptical about the best time to invest and try to 'time' their listing into the market. Rupee cost averaging enables you to opt out of the guessing game. Since you are a regular investor, your money carries more units when the price is low and lesser when the price is high. During the volatile period, it may allow you to get a lower average cost per unit.

Power of Compounding

The law for compounding is simple, you begin investing, the further time your money has to grow.

Example

If you began investing Rs. 10000 a month on your, in 20 years’ time you would have put apart Rs. 24 lakhs. If that investment is increased by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60.

But, if you started investing ten years earlier, your Rs. 10000 each month would sum up to Rs. 36 lakh over 30 years. Considering the same average yearly growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday - more than double the value you would have received if you had begun ten years later.

Have You Filled Your SIP Mutual Fund Form?

Before obtaining any top mutual fund investment, the investor has to fill a form with his personal details such as name, address, the number of units applied for. Other details such as bank account number are also needed so that there is no false encashment. Investors can either give paper forms for their commercial and non-financial transactions directly.

There are many forms for MF transactions such as redemption forms, nomination form, STP form, SIP application form, declaration form, KYC form, etc.

An investor needs to be compliant with the KYC (know your customer) norms before investing in MFs. After that, he can then shortlist the MFs in which he/she would like to invest in. Once, this is done; the investor has to fill in a Mutual Fund form with a supporting cheque. This distinct form will be submitted to the respective Mutual fund house or at CAMS/Karvy centers. Once the form is processed and the cheque encashed, a statement will be sent to your email address or posted to your house.

Investors have the option to do this investment option by themselves by depositing the forms to the MF houses or making use of the services of a distributor.

Top 10 Mutual funds can be purchased either offline or online. Online purchases have three options where the investor can buy MFs from online stock brokerage websites, online mutual fund distributors, and an MF's website.

To redeem means to buy back. It refers to the purchasing back the funds that were sold before. To redeem your MFs or buy them back, there is a simple method by which you can do so. All you have to do is fill an online or paper mutual fund redemption form which may be used for all MFs. CAMS acts as the Registrar and Transfer Agent. The form is available from the MFs AMC office. The mutual fund redemption form is easy to fill. You only need to fill in details such as your name, folio number and the number of units you want to redeem. After this is given to the CAMS processing assistant, your form will be put up for the request.