Frequently Asked Questions About SIP

If you have been planning to invest in SIPs, here are a few frequently asked questions that you must take a look at to get a better idea of the investment. Rest assured, these questions will help you in making an informed decision. 

• What is SIP in mutual funds? 

An SIP or a systematic investment plan is a superior way of investing in a mutual fund scheme. SIPs allow distributed investments with the passage of time by investing a specific, fixed sum at regular intervals. An investor is given the freedom to initiate or terminate an SIP at any given time. 

• How does SIP work?

Every SIP instalment (whether weekly, monthly, quarterly, bi-annually) leads to the purchase of the new fund units at the prevailing NAV. As the time passes by, the price of purchase of fund units averages out and gets on to the lower side. When an investor continues their SIP when the market is down, they can purchase more fund units. On the contrary, when the market is up, the investor can purchase a smaller number of units. This way they can benefit in both cases, when the market is falling or surging. 

• How can I invest in an SIP?

The first step would be considering all the objectives & risk levels of the mutual fund scheme as per your profile and risk tolerance. Once you decide on a specific amount to invest in, you can initiate an SIP. Make sure you have a bank account. Moreover, it would also require you to link it to your investment account.

• How can I stop my SIP?

If you want to stop your SIP, it would be important to inform your fund house about the same. Log in to your mutual fund investment account then fill and submit the ‘stop SIP’ form if you want to do the process online. Alternatively, you can also visit the fund house branch, submit a fully filled cancellation form for SIP to stop your investment.

• What is NAV in SIP?

NAV is the Net asset value. In simple words, it is the cost at which investors can purchase or sell mutual fund units. It must be noted that the NAV of most mutual funds gets updated after the business hours on a day to day basis. Since all mutual fund transactions take place only at the prevailing NAV, when an investor invests in an SIP instalment, their cost of purchase is the prevailing NAV.

• How can I choose mutual funds for SIP?

Different mutual fund schemes have different objectives as well as risk levels. Before making a choice, it is advised to analyze one’s requirements along with risk tolerance. An investor should invest in only those funds, objectives and risk levels of which suit their profile perfectly.

• How much should I invest in SIP?

First of all, assess your key requirements and investment tenure. Keep in mind that the more you invest, the quicker you will reach your goals. Once you know what you want, you take help of any SIP calculator and enter all the required details like (SIP amount, duration of SIP investment, expected annual rate of return and more).        

Also read: 7 Real Facts Why People Love Investing In SIPs

Is Daily SIP Better or Monthly SIP?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.