As an investment option, SIP provides complete flexibility to investors regarding SIP duration and SIP amount. There is no upper limit for the investors to invest through SIP. A SIP can be registered with an amount as low as ₹100.
SIPs are entirely flexible in terms of duration. One can specify the number of instalments or the end date up to which the SIP is registered. Further, the investor can also specify the SIP as a perpetual SIP which means that the SIP will continue to be effective until stopped by the investor. One can decide about the SIP tenure based on the investment horizon and the financial goal with which such investments are linked.
While mutual funds are an investment instrument, SIP is a way to invest in mutual funds periodically. Such periodicity of investment can be weekly, monthly, quarterly, etc. Once a SIP has been registered with the mutual fund house, the SIP amount will automatically be deducted from the bank account and invested in the specified mutual fund scheme.
Generally, it is not possible to modify the SIP amount. However, one can achieve the objective by cancelling the existing SIP and registering a new SIP with the desired investment amount. The entire process is paperless and can be completed on a mutual fund website, thus adding convenience for the investor. Further, one can also register for a SIP top-up if the SIP amount must be increased, which takes care of periodic increments in the regular income, resulting in the increased investible surplus.
No, SIP can be used for investing in all categories of mutual fund schemes and are not exclusive to investing in equity mutual funds. One can also register a SIP in a debt fund like recurring deposit investments while keeping the investment risk relatively lower than equity funds. Further, SIPs can also be registered in hybrid, passive, or solution-oriented funds.
While the SIP may be registered for a fixed number of instalments, one can conveniently extend the SIP duration by modifying the existing SIP instructions to increase the SIP period or registering a fresh SIP mandate for the extended period.
Mutual funds allow investors to register multiple SIPs in a single investor folio, and accordingly, more than one SIP can be recorded even for the same mutual fund scheme.
Yes, the investors can pause an SIP. If there is a temporary disruption in regular income, waiting for a SIP is always better than cancelling an SIP. This is because the SIP restarts after the specified number of SIP instalments, generally three, which ensures that the investor stays on the investment journey they had embarked upon.
In contrast, if the SIP had earlier been cancelled, procrastination often delays the new SIP registration, thereby deferring the investment journey to achieve the financial goals.
These two are contrasting options. While Fixed Deposits are an investment product, SIP investing is an investment option to invest in mutual funds. As far as FDs and mutual funds are concerned, FDs fulfil the allocation towards fixed income products, and mutual funds provide a wide range of investment options. Investors can choose the mutual fund scheme which best suits their investment horizon, risk appetite and financial goals. Such mutual fund schemes can be equity, debt, hybrid, solution-oriented, or passive funds.
SIP is a facility for investing in mutual funds. The gains earned from mutual fund investments are taxed at the redemption of mutual fund units and are taxable as Capital Gains. The tax rate applicable on such Capital Gains depends upon the period of holding such mutual fund investments and the category of mutual fund scheme. Mutual fund schemes are categorised as equity-oriented funds and other funds depending upon the average allocation of its net assets towards equities of domestic companies. If such allocation is 65% or more, the fund can be categorised as an equity-oriented fund.
Yes, an SIP can be registered online conveniently through a mutual fund website. Once the investor has submitted all the SIP details, including the start date, end date, mutual fund scheme, SIP date, periodicity, etc.
A SIP Registration Number is displayed on the screen and mentioned in the SIP confirmation email received from the mutual fund house. To complete the process, one needs to register such SIP with the Net Banking portal of the registered bank account. The SIP instalments get debited automatically from the bank account.