SIPWhat, when, where, how…

everything you wanted to know

about SIP

What is SIP?SIP stands for Systematic Investment Plan. SIP is an organized way of investing regularly in a mutual fund.

Many times we don't have large amounts ofmoney to invest. When you set up an SIPwith any mutual fund, your account isdebited a fixed amount every month. Thisamount is invested in a mutual fund of yourchoice. Over a period of time, yourinvestments accumulate and keep growing.

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Is SIP safe or not?

SIP is a very safe method to invest in mutual funds.

You do not need to worry about timing themarket when investing via SIP. In SIP, youinvest a small amount of money everymonth. In some months, the price will behigh while in some months, the price will below. If you consider the long term, the priceyou pay will be an average of high and low.

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Are SIP returns taxable?Depends on the type of mutual fund you invest in and when you redeem your investment.

Equity mutual fund returns have a tax onthem if redeemed after a year of investment.If you redeem before a year, you will have topay a tax of 15% on your gains. Debt mutualfunds, on the other hand, are taxed at a rateof 20% with indexation benefit. If youredeem after 3 years since investment, youhave to pay no tax.

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Can SIP be stopped?

Yes, you can stop an SIP whenever you wish to.

Unlike fixed deposits (FD) and recurringdeposits (RD), you can stop an SIP any timeyou want. After stopping paying for an SIPplan, you can either choose to redeem yourmoney from the mutual fund or continue toremain invested in the fund.

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Can SIP save tax?

You can save tax under Section 80C by investing in ELSS mutual funds.

To take benefit of ELSS mutual funds via SIP,make sure the total of all your SIPs in afinancial year is ₹1.5 lakhs. Investing morethan ₹1.5 lakh won't give you any additionaltax benefit. You can however still invest in anELSS mutual fund if you feel it is a goodinvestment.

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Can SIP amount be reduced or increased?

No, it is not possible to do so. There is a solution though.

If you absolutely must increase or decreaseyour SIP amount, you can simply cancel yourexisting SIP and start a new SIP in the samemutual fund. The new SIP can then be setwith a higher or lower amount.

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Can SIP be started online?Yes, you can easily start an SIP online.

To start an SIP online using Groww, makesure you have a signed up on groww.in.Upload necessary documents (PAN, addressproof, and bank statement) and then choosea mutual fund you want to start an SIP in. Goto the mutual fund page on groww.in andfollow instructions.

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Does SIP have a lock in period?Only if you invest in close-ended funds.

Mutual funds that have lock-in periods arecalled close-ended mutual funds. If you areinvesting in an open-ended mutual fund,there will be no lock-in period for your SIP. Itcompletely depends on the mutual fund youinvest in.

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Does SIP have exit load?

The exit load of an SIP depends entirely on the mutual fund

If the mutual fund specifies an exit load for aperiod, then there will be an exit load on theSIP also. Most equity funds have an exit loadof 1% if redeemed before a year frominvestment and no exit load if redeemedafter a year. The exit load is calculated uponthe value being redeemed.

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Is SIP better than RD?

SIP has the capability to give much higher returns than RD.

Unlike RD, the rate of return isn't fixed incase of mutual funds. Debt funds usually givemuch better returns when compared to RDand are considered low risk too. If you cantake more risk, you should try setting up andSIP in higher risk equity mutual funds.

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Is SIP good for long term?

Yes. In fact, it is better to invest in SIP for the long term.

Instead of waiting and accumulating moneyto invest, you start investing whateveramount you are able to save. This way, yourmoney is always invested. Not just that, byinvesting for the long-term, you are ensuringthat short-term market volatility does notaffect your investment.

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Is SIP and mutual fund the same thing?

SIP is a method used to invest in mutual funds.

You can invest in mutual funds in two ways:lump sum and SIP. When you invest lumpsum, you put in a large amount of money in amutual fund in one go. In SIP, you investsmaller amounts of money on a regular basis- usually every month.

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Which SIP to invest?

That depends on your needs.

If you are willing to take risks, you can checkout small and mid cap mutual funds. On theother hand, if you want moderate risk, youcan take a look at large cap mutual funds.You can also check out debt mutual funds ifyou want to be exposed to very low risk.

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ABOUT USGroww is an online platform you can use

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