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You might wonder why this question is important. Many people may get confused between a mutual fund and an SIP, as they presume that both words are synonymous. However, it is not true. Mutual funds are an investment product, while systematic investment plans (SIPs) are a way to invest in mutual funds.
When it comes to mutual funds, financial experts always advocate opting for the SIP mode instead of the lump sum. With the SIP, one has the option to invest small amounts. It reduces risks through rupee-cost averaging. Also, it instils the discipline of savings.
At present, six types of SIPs are the most common. They are as follows:
There is no specific limit on your investment amount through the SIP investment mode. You can even start your investments with Rs 500. However, if you want to invest through the SIP mode for any specific goal, our calculator will help you decide the exact SIP amount that you need to invest in and the tenure of your investments.
SIP investments are made for all. Experts always suggest that investors should opt for the SIP mode while investing in market-linked products, especially in hybrid and equity funds. As we all know, the market is volatile. Therefore, if you opt for the SIP mode while investing in the market, it will reduce the volatility over a period of time.
Since the returns of your investments through the SIP route are market-linked, the returns of your investments will depend on the performance of your mutual fund scheme. You can visit the website of Value Research to choose a fund that goes with your investment time frame and goal. And using our calculator, you can get an estimate of your returns.
When it comes to selecting a mutual fund for your SIP investments, you should take care of a number of factors. These include the investment objective of the fund, its expense ratio, the tract record of the fund manager, and most importantly, the performance of the fund across various cycles.
Always remember that the fund you are planning to invest in should help you meet your investment goals and should maintain a track record of delivering returns. Also, if your fund's expense ratio is low, then it will increase your total returns at the end of your investment tenure.
As long as you want, you can continue with your SIP investments. There is no maximum period attached to this investment mode. And if you opt for the perpetual SIP mode, as we discussed above, your investments can continue indefinitely.
As we have discussed earlier, if you opt for flexible systematic investment plans, you can modify your SIP investment amount. But if you opt for other types of SIP, as discussed above and start your SIP investments, then it will not be possible for you to modify the amount during the specific investment period. Having said that, based on your investment goals, you can always stop or pause your SIP investments.
Yes, you can invest in debt mutual funds through the SIP mode. Although people tend to go for the SIP investment mode while investing in equity and hybrid funds, one can also start SIP investments in debt funds. Although debt mutual funds are not as volatile as other categories, they can face situations like falling or rising interest rates. Therefore, SIP investments in debt funds are very much possible.
Yes, it is very much possible to renew an SIP investment automatically. Also, AMCs provide investors with the option to cancel the auto-renew feature available with these AMCs.