What is SIP or Systematic Investment Plan?

What is SIP or Systematic Investment Plan?

A SIP or Systematic Investment Plan is a smart and hassle-free financial tool, offered by mutual funds to help investors invest regularly in the disciplined manner. SIP allows you to invest a pre-determined amount of money at a regular interval, over a period of time. The frequency of investment is usually weekly, monthly or quarterly.

The concept of SIP (Systematic Investment Plan) is similar to a recurring deposit where the investment of a fixed amount is made on a regular basis. A SIP is a disciplined approach towards investments and helps you to create wealth for the future by investing a small amount of money periodically instead of lump sums. In this post, let’s take a look at how does SIP work and what are the benefits of SIP.

Also read: How to start a SIP?

How does SIP work?

A SIP works on the principle of regular investments. In a SIP, your pre-determined amount of money is auto-debited from your bank account and invested into a particular mutual fund scheme chosen by you. A certain number of units based on the ongoing market rate (called NAV or net asset value) for the day are allocated to you.

Every time you invest money, additional units of the mutual fund scheme are allocated to you on the basis of the market rate. In this way, SIP provides with the flexibility to buy more units when the price declines and lesser units when the price surges. 

Hence, units are bought at different market rates and investors avail from Rupee Cost Averaging and the Power of Compounding. Moreover, the handling of your money is done by professional fund managers and is none of your headaches.

Benefits of SIP (Systematic Investment Plan)

Following are the benefits of investing in mutual funds through SIP route.

1. Rupee-Cost Averaging

With the volatile market, timing the market is a difficult task. Rupee Cost Averaging is an automatic investment strategy that eliminates the need to time the market. When you invest a fixed amount in a mutual fund at a regular interval over a period of time, you fetch more units when the price is lower and lesser units when the price is high. In this way, you would reduce your average cost per unit over time. This strategy is called 'rupee cost averaging'.

2. Benefits of Compounding

Investment experts always recommend that one must start investing early in life and to keep investing regularly. The main reason for doing that is the benefit of compounding. A small sum of money invested regularly can grow to a large sum. This helps in creating a large amount of wealth which includes your own contribution, plus returns compounded over the years. Compounding means earning a return on returns. The longer the compounding period, the higher the returns.

3. Disciplined Investing

Discipline is the key to investing success. The important rule of building your corpus is to invest regularly and maintain a discipline in your investing pattern. When you invest through SIP, you commit yourself to invest a fixed amount regularly. Investing regularly a small amount of money can often lead to better results than investing in a lump sum. Every small investment is a step towards achieving your financial goals.

4. Flexibility

It is always advisable to continue SIP investments with a long-term perspective but there is no such compulsion. You can discontinue the plan at any time. SIP amount can also be increased or decreased.

5. Simple and Convenient to monitor

SIP is a simple and convenient mode of investment in mutual funds. You do not have to spare time from your busy schedule to make your investments. SIPs come with easy payment options. You can either give post-dated cheques for your fund or just opt for an Auto Debit from your bank account. You can also monitor your investment online or through the monthly statement of accounts.

6. Long-Term Gains

SIPs have the potential to deliver good returns over a long investment horizon due to rupee-cost averaging and the benefits of compounding.

7. Affordable

SIPs in mutual funds are affordable because you can start investing with an amount as low as Rs 500/month.

You may also like to read: How to start a SIP?

You may also like to read: How to set your financial life in order?

You may also like to read: What should be the duration of the SIP?

You may also like to read: All about ELSS | Equity linked saving scheme | Tax saving mutual funds

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What is SIP or Systematic Investment Plan?

What are Mutual Funds | Benefits of investing in Mutual Funds

What are Mutual Funds | Benefits of investing in Mutual Funds

A mutual fund is an investment vehicle for investing in stocks and bonds. Mutual funds pool money from a large number of investors and invest this money in securities such as stocks, bonds, money markets instruments and similar securities. 

These funds are managed by professional fund managers, who invest the fund's money in various securities and attempt to produce capital gains for the fund's investors. 

Every investor has a share in the gains or loss of the fund. Investing in mutual funds is much easier than buying or selling individual stocks and bonds on your own. Investors can redeem their units when they want.

Who regulates Mutual Funds?

All mutual funds are registered with SEBI (Securities and Exchange Board of India). SEBI formulates policies and regulates the mutual funds to protect the interests of the investors. It notified regulations in 1993, revised in 1996 and issues guidelines from time to time.

Also read: Direct mutual funds platforms in India to invest online? 

Who Manages Mutual Funds?

Mutual funds are managed by an AMC (Asset Management Company). An AMC is a company that invests its clients' pooled money into securities such as stocks, bonds, money markets instruments and similar securities that match the declared financial objectives. 

An AMC may have various types of mutual fund schemes. The AMC hires a professional fund manager, who buys and sells securities for achieving the objectives of the mutual fund scheme.

Benefits of investing in Mutual Funds

Following are the benefits of investing in mutual funds:

Professional Money Management

Professional fund managers manage the money collected by a mutual fund. Fund managers monitor the market and economic trends and analyze securities in order to pick good investments for achieving the objectives of the mutual fund scheme.

Small investments

The minimum initial investment for a mutual fund is very low for most funds. You can start investing with as low as Rs. 500 and get the advantage of long-term equity investment. This is the biggest benefit of mutual fund that at a very low cost the investor gets his investment managed by experts.

Diversification

An example of diversification is provided by the proverb "Don't put all your eggs in one basket". A mutual fund invests in various sound stocks or bonds, which help in spreading the risk factor. If a particular sector does not perform well then the loss can be compensated with profits made in other sectors.

Transparency

Mutual funds provide regular updates to the investors such as daily NAVs, as well as information about the current value of the investment and fund manager's strategy to give a picture of how your investments are doing. The performance of a mutual fund is reviewed by various rating agencies, making it easy for investors to compare between different mutual funds.

Safety

All the mutual funds are regulated by SEBI (Securities and Exchange Board of India). It assures that your investments are managed in a disciplined and regulated manner and are in safe hands.

Liquidity

You can sell your mutual fund units on any business day. Unless they have a pre-specified lock-in period, your money will be available to you anytime. An open-ended fund can be sold at NAV based prices and a close-ended fund can be traded on the stock exchange.

Choice and Variety

The investors can choose funds from a wide range of mutual fund categories and types available to them. This enables the investor to choose what suits him/her best according to his/her risk-bearing capacity and return expectation.

Beat Inflation

Mutual funds are as an ideal investment option to help the investor to put their savings for long-term inflation adjusted returns. Investing in mutual fund over a long period is one of the best ways to stay ahead of inflation.

Also read: Mutual fund Apps for investing in mutual funds 

Disadvantages of Mutual Funds

Risks and Costs

The value of a mutual fund fluctuates according to the changing condition of the market. Most of the mutual funds charge operating fees and expenses associated with investing in mutual funds from investors. Some mutual funds also charge high sales commissions and redemption fees.

No Guaranteed Returns

Returns on mutual funds are not guaranteed as mutual funds invest in debt as well equities. Returns on a mutual fund depend on the market conditions.

No Control on Investment

The investor does not have any control over investment because the fund manager decides what to invest and when to invest. It means you trust someone else for your money when investing in a mutual fund.

No Insurance

Mutual funds do not have insurance coverage. Although, all the mutual funds are regulated by SEBI (Securities and Exchange Board of India) bur are not insured against losses.

Types of Mutual Funds

SEBI has broadly classified mutual fund schemes in the following groups:

1. Equity schemes

Equity schemes further classified into 10 categories.

2. Debt schemes

Debt schemes further classified into 16 categories.

3. Hybrid schemes

Hybrid schemes further classified into 6 categories.

4. Solution oriented schemes

Solution-oriented schemes are classified into 2 categories.

5. Other schemes

Other schemes are classified into 2 categories.

Large Cap

1st - 100th company in terms of full market capitalization.

Mid Cap

101st - 250th company in terms of full market capitalization

Small Cap

251st company onwards in terms of full market capitalization.

What is NAV?

NAV (Net Asset Value) is the value of a fund's assets minus the value of its liabilities per unit. It is calculated by the AMC at the end of every business day. NAV = (Value of assets-Value of liabilities)/number of units in the fund.

Also read: How to invest in mutual funds online?

Also read: How to start a SIP?

Also read: Benefits of SIP | Advantages of SIP

Also read: ELSS (Equity Linked saving Schemes) | Tax saving mutual funds

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What are Mutual Funds | Benefits of investing in Mutual Funds

HDFC Digital Loan Against Mutual Funds (LAMF)

HDFC Bank, one of the leading private sector banks in the country, has launched its Digital Loan Against Mutual Funds (LAMF), in partnership with mutual fund transfer agent CAMS. HDFC Bank is one of the first to offer, Digital Loan Against Mutual Funds (LAMF). 

In this post, let’s take a look at how to avail HDFC Digital Loan Against Mutual Funds (LAMF).

What is Digital Loan Against Mutual Funds (LAMF)?

Digital Loan Against Mutual Funds (LAMF) is an instant facility offered by Once you apply for LAMF, an overdraft limit will be set in your account in just 3 minutes. With this facility, now you can enjoy the benefits of instant availability of funds, retention of mutual fund returns without liquidation or stopping your SIPs.

Benefits of HDFC LAMF

Following are the key benefits of

1. The LAMF facility is available across the country on HDFC Bank website.

2. There is no need to sell your best performing mutual funds instead you can use LAMF facility.

3. Instant online approval of the loan in few minutes.

4. The loan is available against both debt & equity mutual funds.

5. No need to visit bank branch as the entire process online.

6. First-time borrowers without credit history can also access loans.

7. New loans and enhancements can be done online any time.

8. Interest is applicable only on the utilized amount.

Also read:

HDFC utual Funds

HDFC Digital Loan Against Mutual Funds is offered against both equity and debt mutual funds offered by following

1. Aditya Birla Sun Life Mutual Fund

2. DSP Black Rock Mutual Fund

3. HDFC Mutual Fund

4. HSBC Mutual Fund

5. ICICI Prudential Mutual Fund

6. IDFC Mutual Fund

7. IIFL Mutual Fund

8. Kotak Mutual Fund

9. L&T Mutual Fund

10. Mahindra Mutual Fund

11. PPFAS Mutual Fund

12. SBI Mutual Fund

13. Shriram Mutual Fund

14. Tata Mutual Fund

15. Union Mutual Fund

Purpose of HDFC LAMF

Please also note that Digital Loan Against Mutual Funds is granted only for personal purposes only. The loan amount cannot be used for the following purposes.

1. For speculative activities.

2. For any purpose linked to capital market activities.

3. For any anti-social purposes.

Interest Rate for HDFC LAMF

Annual Percentage Rate applicable for

1. Equity Mutual Funds

Min APR – 9.25%

Max Apr – 11.14%

Avg APR – 10.32%

2. Debt Mutual Funds

Min APR – 7.95%

Max APR – 10.62%

Avg APR – 9.71%

Annual Maintenance Charges

-  Minimum Rs. 1000

-  Maximum Rs. 5000

Processing Fees

How to avail HDFC Digital Loan Against Mutual Funds?

Step by step instructions to avail HDFC Digital Loan Against Mutual Funds is given below.

1. Visit HDFC website (https://apply.hdfcbank.com/dapweb/las#).

2. Enter your HDFC customer Id and mobile number.

3. Enter the given code and click on “Proceed” arrow.

4. Enter your Aadhaar number and, click on box to accept terms & conditions.

5. Select “Yes” or “No” option against “Are you registered with MyCAMS”.

6. Select mutual fund types (Equity or Debt).

7. Authorize HDFC bank to share your KYC details and email id with CAMS.

8. Click on “Proceed” button.

9. Now you will be redirected to MyCAMS website.

10. If you are not registered with MyCAMS then you have to register yourself on MyCAMS. If you are already registered with MyCAMS then just login using your password.

11. Now select the mutual funds to mark lien.

12. Calculate the eligible limit by choosing number of units from selected units.

13. Check LAMF terms & conditions and declaration.

14. Enter your One Time Password (OTP) to activate overdraft facility to use in your account.

Also read: How to pay HDFC Credit Card bills?

Also read: HDFC SmartBuy E-commerce Platform

Also read: How to block HDFC Debit Card?

Also read: HDFC Bank EasyKeys

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HDFC Digital Loan Against Mutual Funds (LAMF)

Benefits of SIP | Advantages of SIP

Benefits of SIP | Advantages of SIP

SIP (Systematic Investment Plan) in mutual fund scheme is the most popular concept in India. It is a smart and hassle-free financial planning tool, offered by mutual funds to help investors invest at regular intervals over a period of time. The concept of SIP is similar to a recurring deposit. In this post, let us discuss all about Benefits of SIP | Advantages of SIP.

Benefits of SIP | Advantages of SIP

SIP is a disciplined approach to investing small amounts periodically instead of lump sums in a mutual fund. It helps you to accumulate wealth, step by step, for the future by investing a small amount of money periodically. There are various benefits of SIP and in this post, we will discuss top five benefits of SIP.

Benefits of SIP | Advantages of SIP

Following are the top five benefits of SIP.

1. Disciplined Investing

2. Rupee-Cost Averaging

3. Power of Compounding

4. Flexibility

5. Simple and Convenient

Benefits of SIP | Advantages of SIP

Disciplined Investing (Benefits #1)

As the name says, SIP is a systematic investment. Discipline is the key to investing success. It is a disciplined approach to investing small amounts periodically instead of lump sums in a mutual fund. Regular investment of small amount makes you disciplined in your investments and also helps to accumulate wealth in the long term. In a SIP a pre-determined amount of money is directly deducted every month from your bank account and invested in your selected mutual fund. You don’t have to play any role in further investment apart from ensuring availability of the money in your bank account on the date of investment.

Rupee-Cost Averaging (Benefits #2)

With the volatile market, it is difficult to time the market. The market may go down after you invest or it may go up after you sell. It is very hard to predict the market. The SIP is the way to beat this unpredictability of the market. Rupee Cost Averaging is an automatic investment strategy which does not require timing the market. When you invest a fixed amount in a mutual fund at a regular interval over a period of time, you get more units when the market is low and lesser units when the market is high. In this way, you would reduce your average cost per unit over time and there would be fewer chances of loss. This strategy is called 'rupee cost averaging'. This helps you to not worry about market volatility.

Power of Compounding (Benefits #3)

Investment planners always recommend that one must start to invest early in life and to keep investing regularly. The main reason for doing that is the power of compounding. When you start to invest in mutual funds via SIP route early in life and invest for long-term, you take benefits of power of compounding. Compounding means earning a return on returns. Your small sum of money invested regularly in mutual fund through SIP can grow to a large sum. This way, you accumulate a large amount of wealth which includes your own contribution via SIP, plus returns compounded over the years. The longer the compounding period, the higher the returns.

Flexibility (Benefits #4)

SIP is a regular investment and to get the full benefits, you should keep invested for as long as possible. Therefore, it is advisable to continue your SIP investments with a long-term horizon but there is no such compulsion. SIPs do not have a fixed period. You can stop your SIP at any time. Also, you can extend the tenure of it by just requesting the mutual fund company. The investment amount can also be increased or decreased.

Simple and Convenient (Benefits #5)

SIP is always simple and convenient than lump sum investment. There is no need to spare time from your busy schedule to make your investments in mutual funds via SIP route. SIPs come with easy payment options. You can just opt for an Auto Debit from your bank account or give post-dated cheques for your SIP. You don’t have to do anything further apart from ensuring availability of the money in your bank account on the investment date. You can also monitor your investment online or through monthly statements.

Hope this will help you to know all the benefits of SIP and you will be able to invest in mutual funds via SIP route. Benefits of SIP

Also, read: How to start a SIP?

Also, read: What should be the duration of the SIP?

Also, read: How to invest in mutual funds online?

Also, read: All about ELSS | Equity Linked Savings Scheme | Tax saving mutual funds

If you liked this article, share it with your friends and colleagues through social media. Your opinion matters, please share your comments.

Benefits of SIP | Advantages of SIP

All about ELSS | Equity Linked Savings Scheme | Tax Saving Mutual Funds

What is ELSS (Equity Linked Savings Scheme)?

ELSS is a type of diversified equity mutual fund where most of the corpus is invested in equity and equity-related products. ELSS funds have a lock-in period of three years. The investment made in ELSS fund qualifies for tax exemption under Section 80C of the Income Tax Act.

They are open-ended and the investor can subscribe to the fund at any day. Since ELSS (Equity Linked Savings Scheme) is an equity-based fund, the returns from these funds reflect the returns from equity markets.

What are the tax benefits of investing in ELSS funds?

Investment of up to Rs.1.5 lakh made in these funds qualifies for tax deduction under Section 80C every year.

Why are the other benefits of investing in ELSS funds?

ELSS fund don't just help you save tax but also give you an opportunity to compound your money from the potential of the Indian equity market. Moreover, compared to other tax saving instruments like PPF, NSC, and Bank FDs, the lock-in period of an Equity Linked Savings Scheme is much lower. They have has a lock-in period of 3 years from the date of investment.

You can opt for the dividend option and get some gains during the lock-in period. Also investing through SIP helps in Rupee Cost Averaging. There is no maximum limit to invest, but you can claim a tax deduction up to Rs.1.5 lakh only.

Who can invest in ELSS funds?

Individuals and HUFs are eligible to invest. NRIs can also invest in these funds. However, most AMCs do not allow NRI’s from Canada and USA to invest in India.

For whom the ELSS is suitable?

ELSS is suitable for those types of investors who are not risk averse and want to invest in tax saving options. ELSS is a good option to have for youngsters who have just started their career. ELSS is also suitable for those investors who have the ability to take the risk as well as the flexible long time horizon for returns that beat inflation.

How to invest in ELSS funds?

KYC compliance is compulsory for investing in mutual funds in India. Once you fulfill KYC compliance you can start investing. There are offline and online options to invest. You can invest online through AMC (Asset Management Company) websites, brokers’ platforms or independent websites. You can invest in a lump sum or via SIP.

What is the investment limit in ELSS fund?

You can start investing with a minimum amount of Rs 500. There is no upper limit on investment. However, you can avail a maximum deduction of Rs. 1.5 lakh under Section 80C of the Income Tax Act in a financial year.

What is the investment tenure in ELSS fund?

The investment tenure in Equity Linked Savings Scheme is 3 years from the date of investment. This means you can exit from ELSS fund by selling it after 3 years. However, you can stay invested in ELSS fund as long as you want, with or without further contributions.

Note that if you are investing via SIP route, then every installment will be locked in for 3 years from the respective investment date.

What are the plan options available?

These funds have two plan options:

1. Growth option: In this option, you will get a lump sum on the completion of 3 years. This plan option is recommended for long-term wealth creation.

2. Dividend option: Under this option, you will get dividend whenever the dividend is declared by the fund even during the lock-in period. The dividend received is also tax-free.

Which are the best ELSS funds?

The best performing ELSS funds are:

1. Axis Long Term Equity Fund

2. Aditya Birla Sun Life Tax Relief 96

3. Invesco India Tax Plan

4. ICICI Prudential Long term Equity Fund (Tax Saving)

5. DSP Tax Saver Fund

You may invest in these ELSS schemes via SIPs but keep an investment horizon of five years or more in mind.
How are the above-mentioned ELSS schemes performing?

Scheme Name	Returns in Percentage*				AUM (Rs Crores)	Crisil Rank (Sep 30, 2018)	Value Research Rating (Out of 5)
	1 Year	3 Years	5 Years	10 Years
Axis Long Term Equity Fund	1.7	11.69	19.78	NA	17626	2	5
Aditya Birla Sun Life Tax Relief 96	-5.44	12.14	18.92	18.49	6984	1	5
Invesco India Tax Plan	-2.24	11.6	17.6	19.09	687	1	4
ICICI Prudential Long Term Equity Fund (Tax Saving)	-0.18	9.66	15.71	19.64	5486	2	3
DSP Tax Saver Fund	-8.63	11.78	17.24	18.19	4567	3	4
*As on 4/1/2019  Data Source: Value Research Online

Is premature redemption is allowed?

ELSS is an equity fund and comes with 3 years lock-in period. Therefore, you are not allowed to redeem before completion of 3 years. You will necessarily have to remain invested for 3 years.

What are the advantages of ELSS fund over NSC and PPF?

ELSS fund has a short lock-in period compared to NSC and PPF.   

Since ELSS is an equity-based fund, the earning potential is high. If you choose for dividend payout option, you can get some gains during this period. You can invest via SIP route.

What are the disadvantages of ELSS fund over NSC and PPF?

Since ELSS is an equity-based fund, the risk factor is very high compared to NSC and PPF.

Is investment in ELSS funds risky?

ELSS fund comes with equity-related risk as they invest in the stock markets. They do not guarantee the returns. However, the best performing funds generated good returns post inflation.

How to check ELSS funds investments?

You can check your ELSS funds investments in the monthly/quarterly statements which are sent by the AMC to every investor. All the AMCs provide online facility to investors, which allow a hassle free view of the investments.

Also read: Benefits of SIP | Advantages of SIP

Also read: How to start a SIP?

Also read: 7 Investments for tax free income in India

Also read: What is NPS (National Pension System)?

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