Do you know what is SIP in Mutual Fund and how it works? In this article, I am going to tell you about it completely. You must have heard many people talking about SIP. You must have seen many articles, videos related to SIP on your mobile phone or computer. It’s a very popular saving investment at present which provides great profit in short and long term investment. There are many ways to save, but with saving, also important to increase the saving amount according to the time is saving.
We can invest the saved amount in many places and get good profit. But if we want to get regular and balanced money, then we should invest the saved amount through SIP. By doing SIP, not only are we increasing our savings, but through this, we also get tax exemption. Initially, people had confused about SIP and they considered it harmful, but as the awareness increased about it, now many people are investing in it and earning a handsome profit regularly.
We have heard many times that the ocean is formed by small droplets and this is also 100% true. The same method works in the case of investments. It is not at all necessary that we always have to make big investments to earn a big amount. SIP is a very easy way to invest with low loss. In which you can save for a big goal by investing a fixed amount every month/interval, then with that small investment amount, you can get a big amount in the long run. Through SIP, the investor has to invest a certain amount for a certain period in the stock market, mutual fund, or gold, etc. Investing money through SIP is a very good idea. A fixed amount is invested in SIP at stipulated time intervals. The investor can invest in the stock market, mutual fund, and gold ETF through SIP.
SIP has brought mutual funds within the reach of the middle-class man as it makes them able to invest even those people whose budget is very less. Those who are unable to make big investments in one go but they can invest 500 or 1000 ₹ every month. So through SIP, he has come within the reach of such people. Middle-class people can earn huge profits by making small investments for a long time.
For the companies whose SIP plans you have taken; your profit will increase according to its market performance. First of all, you have to study which company is giving good growth on regular basis, what is its market value, how many assets it has, and how much are its liabilities. Investing after doing all the studies can be a risk-free profit.
Benefits of SIP (Mutual Fund)
1. Small investment advantage: – As we know that only a fixed amount has to be invested regularly at fixed intervals, so it is very easy to get the amount for investment from your routine and expenses. You can get a large amount by investing a small amount at fixed intervals continuously for a long period.
2. Easy to invest: – Investing in SIP is very easy. There is no need to worry much about this, just once you have selected your plan, and the mutual fund withdraws the amount from your account and deposits it in your chosen plan on the specified date. Your bank account is linked with your SIP scheme account. Like if you plan to invest 500 ₹ every month, then every month 500 ₹ is transferred from your bank account to the SIP account.
3. Risk reduction in Investment: – The biggest and main advantage of SIP is that the risk in it is very less. Suppose you have thirty thousand rupees to invest in the stock market. You put that money together in the stock. Now you don’t have an idea whether the market will go up or down the next day. This would be a very risky deal. If the same investment is divided into short intervals, then the risk is reduced. We can save ourselves from the loss of the stock market by depositing this Rs 30,000 in 10 installments of Rs 3000 each. Similarly, SIP saves us from the disadvantages of the stock market by investing a small amount because of not investing a large amount at once.
4. Advantage of tax exemption: – When you invest in SIP, you do not get any tax on the amount invested or withdrawn. But the schemes giving tax exemption have a lock-in period such as 3 years. You can take the tax exemption by investing in them.
5. Advantages of Compounding: – The word compounding means getting interested in interest also. Whenever an investment is made in SIP and whatever return is received on the amount of that investment, it is re-invested again from the same place, which increases the profit of the investor and in his profit.
6. Facility to withdraw money from SIP: – There is no lock-in period in most of the SIP schemes. The lock-in period is the time without which you cannot withdraw your money from the scheme. But most of the SIP schemes do not have a lock-in period. The investor can decide to continue or stop investing in SIP according to his need. By implementing this, the investor not only gets good returns but also gets advanced liquidity at his convenience. You can start investing in SIP today only at the rate of ₹ 100 per month. In this, you do not need to choose Mutual Fund. The benefits of SIP are very high and its drawback is minor.
