MUTUAL FUND SIPS: ALL ABOUT THE UNKNOWN ASPECTS OF YOUR MONTHLY INVESTMENTS

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According to a recent data by the Indian mutual funds’ regulator – Securities and Exchange Board of India (SEBI), investors invested around Rs 9182 crores in mutual funds via SIP last year. For those of you who want to recall what Systematic Investment Plans (SIP) are, they are nothing but an investment tool to invest in mutual funds. SIPs allow investors to allot a predetermined sum of money in their desire mutual fund schemes in a periodic and disciplined manner. Here are a few unknown aspects of your monthly investments:

  1. No, you do not have to be rich
    This is one of the most popular myth prevailing around SIP investments. Investors do not have to be filthy rich to invest in SIP. In fact, as an investor you can invest as little as Rs 100 per month in your desired mutual fund schemes. What’s more, there’s no upper limit to invest in mutual funds SIP. You can invest any amount that you can afford and helps you achieve your financial goals.
  2. You can withdraw funds without stopping your SIPs

If you have invested in an open-ended mutual fund scheme, you can withdraw your money any time you want. What’s more you can continue to make SIP investments in these funds and still extract the accrued balance. Usually, fund houses and AMCs (asset management company) follow the FIFO (first in first out) technique for withdrawal of mutual fund schemes. What’s more instead your completely stopping and withdrawing your SIP investments, you can choose to pause them and invest once you have regular inflow of cash.

  1. Lock-in period
    If you invest in ELSS mutual funds via SIP, your investments must complete a mandatory three-year lock-in period. However, the issue here is that investors often think that they can withdraw the entire amount after completion of three years, which is not true. Each SIP instalments are mandated to complete the three-year lock-in period. For instance, if you start a monthly SIP investment of Rs 5000 in ELSS funds on 1st March 2017, after three years, i.e. only your first instalment would have completed the three years. On 1st April 2020, your second instalment would have completed three years, and so on.
  2. You can also invest in debt funds via SIP

Contrary to popular belief, you can make SIP investments in debt funds. Though equity funds are more ideal as they have the desired time horizon to bear the volatility, SIP in debt funds do make sense under following conditions – If you wish to invest for a prolonged duration to fulfill financial goals such as balancing risk in the portfolio or creating an emergency fund, SIP in debt or even liquid funds might be considered ideal.

So now that you have been aware of a lot of aspects of SIP investments, take a step ahead towards investing for your future. What’s more, you can even invest in mutual funds online via SIP. Happy investing!