What Is Sip Investment and How It Works

Overview Of Simple Investment Plan

A Simple investment Plan, commonly referred as SIP is an investment plan in which the investor invests a small amount of fund regularly in his preferable mutual fund schemes available with banks/financial organizations.

An SIP is the most convenient and least risky way of investing in mutual fund schemes. With a simple investment plan, you don’t need to invest a lump sum amount, instead a fixed amount is to be invested on timely intervals. The frequency of investment can be weekly, monthly, quarterly or six-monthly depending upon preference and convenience of the investor.

Features Of S.I.P

Lower risk as compared to other investments
Flexibility of investment, i.e. monthly, weekly, quarterly etc
Advantage of diversification,i.e. any mutual fund scheme can be selected
Tax benefits&
Higher returns

Benefits Of SIP

Generates Income or Capital Profit

The best advantage of SIP are the numerous avenues they provide for earning some extra bucks in the form of bonuses, interests, dividends etc. These bonuses, interests, dividends etc may beeither guaranteed or non-guaranteed. The capital gains can also be earned through sale of equities, mutual funds, debts or real estate.

Accumulation of wealth

It wouldn’t be wrong to say that wealth accumulation cannot be done unless you have invested in a proper investment plan. A life insurance policy may be also a good investment plan but requires lot of considerations. On the other hand, SIP is a great means to accumulate wealth through returns over a long period of time.

Tax Benefits

You can avail tax benefits if you invest in SIP. The investment you make towards SIP are tax free and the amount which you get on maturity is also tax free. However, there’s a condition. If you are investing in equity or mutual fund schemes through SIP then all the gains made after a year will be considered as long-term capital gains and will be totally tax exempted. However, if the SIP were in debt funds or hybrid funds, the tax will be charged.

Aid for life’s risk:

Life is uncertain and nobody’ knows what’s going to happen next. Investment in SIP helps you and your family prepared for any kind of financial risk. Start investing early and see wealth accumulating as you grow old.

How To Start Investing In SIP?

SIP is related to mutual fund schemes, therefore, before investing you need to know more about the objectives of risk involved in the mutual fund schemes. It should be in accordance with the consideration of the investor and his level of risk tolerance. Once you investigate about a particular mutual fund scheme and find it to be perfect, you can go for it. For starting an SIP, you need to have a bank account with that bank and it need to be linked with the investment account. To make SIP process smooth and ongoing, you can get the electronic clearing system or ECS activated in your account. This will ensure that a specified amount is deducted at regular time intervals and is invested with the mutual fund scheme.

Eligibility For Starting SIP With Paisa Dunia

Before starting a SIP, you need to have a bank account.

The applicant must be a citizen of Indian and staying in India.
He must be above 18 years of age.
He must have a valid ID proof, preferably PAN card.
He must have one bank account in the bank from where he wishes start his SIP.

Documents Required For SIP

Before starting a SIP, you need to have a bank account.

The applicant must have valid PAN Card.
He must have a valid identity proof document like Aadhar card, Voter ID card, Passport, Driving License, preferably PAN card.
A valid address proof document like Aadhar card, Passport, Driving License, Utility Bill etc is required.

How To Apply For SIP at Paisa Dunia

SIP application can be done either by filling a form or online. It’s more convenient to fill up the online form.
Go to Paisa Duniya, open up the SIP application form.
Tell us about yourself by filling in the general details of yourself like your name, email address, date of birth, annual income etc.
Tell us where do you stay by filling in the current address.
Select the type of mutual fund scheme you would prefer while the tenure of your SIP.

Frequently Asked Questions (FAQ's)

What is SIP?

SIP or Systematic Investment Plan, allows you to invest a small amount on regular time intervals in your preferred mutual fund schemes.

Is SIP safe?

It is quite safe in the long run and ideal for generating enough wealth with low risk over a longer period of time.

Is SIP amount fixed?

A fixed SIP amount is deducted every month from your bank account which is not too large.

Is SIP better than FD ?

SIP is always better than a fixed deposit in terms of flexibility of investment, higher returns, advantage of diversification and Tax benefits. That’s why it is better to invest in SIP.

Is SIP better or reccuring deposits?

There is liquidity in Recurring deposits but if it is withdrawn prematurely there are penalty charges. On the other hand, there are no penalty charges in SIP on closing or withdrawing money.

Who can start an SIP?

Anyone can start SIP, even the students who are not earning can start with SIP.

How to discontinue SIP?

You just need to log-in your mutual fund account and click on Cancel. Th SIP gets cancelled within a month. If you started the SIP through an agent, you can cancel the SIP through the agent’s portal also.

Is there a maturity period for SIP?

Yes, there is a maturity period for SIP which defers according to various Mutual fund schemes.

Is SIP tax free?

If you are investing in equity or mutual fund schemes through SIP then all the gains made after a year will be considered as long-term capital gains and will be totally tax exempted. However, if the SIP were in debt funds or hybrid funds, the tax will be charged.

Invest In SIP