Systematic Investment Plan, commonly known as SIP, is a godsend investment avenue to those who wish to multiply their wealth efficiently without parking too much of their money in a single asset class at a given time.

Thanks to demonetization, many individuals have discovered the charm of SIPs and mutual fund investment. This, in turn, has increased the popularity of SIP investments and led to its growth spurt over the years. Today, as per the latest Association of Mutual Funds of India [AMFI] data, there are about 3.09 crore SIP accounts in the country.

For starters, SIPs are a way of investing in mutual funds. To elaborate, various asset management companies [AMCs] offer SIPs as a method to invest in mutual funds in a disciplined manner.

Under the SIP investment method, an investor chooses a mutual fund scheme according to his/her investment needs and regularly invests a fixed amount in these schemes. The periodicity can be daily, weekly, monthly, quarterly, semi-annual, or annual. An investor can invest in SIPs with an amount as low as Rs 500.

Let’s understand how SIP works with the help of an example.

Let’s say your monthly salary is Rs 50,000 and you set aside 10% for your monthly SIP mutual fund investment.

Meticulous research on the most significant mutual funds in the country will aid you to perceive how a few funds have continuously outperformed the overall market over a considerable period.

Suppose you first started investing Rs 5,000 per month in XYZ fund from March 2010. Under this investment, Rs. 5000 will be automatically invested in XYZ fund every month. One of the major advantages of SIP investment is the power of compounding it offers.

The Rs 5,000 that you periodically invest in mutual funds online accumulates over the years to form a substantial corpus. Between March 2010 and March 2020, you would have made 120 investments of Rs 5,000 each into the fund. Today, the total of the principal invested would be Rs 6 lakh [120*Rs 5,000].

If you calculate the return on this at 12%, the investment would have grown to Rs 11.6 lakh, almost double your original investment.

Even if you adjust this against an assumed inflation rate of 6%, your wealth would grow to Rs 8.24 lakh in this period, i.e. a nearly 50% appreciation of the capital invested.

How to invest in SIP?

1. Know the investment objective and your risk tolerance
   You should first apprehend your risk appetite before investing. After you have assessed your risk appetite, it is important to understand why you want to invest and define your financial goals. It is vital to know the objective for your investment to get the right portfolio mix of debt and equity.
2. Choose the apt mutual fund for your investment
   The selection of your mutual funds should be entirely based on your risk appetite, financial goal, and investment horizon. While choosing the fund, you should also consider its past performance. Once you have chosen the mutual fund company, follow these steps:

• Fill up the application form
• Duly fill the KYC form
• If you opt for the offline mode, fill up a cancelled cheque of the monthly SIP amount. However, if you plan to opt for the online mode, fill up the ECS [Electronic Clearing Service] mandate form to be given your bank.
• Provide requisite identity proofs

3. Select the date of SIP investment
   Choose a date as per your convenience. You can also choose multiple dates for multiple SIP investments in a month.

SIPs are a perfect way to utilize your investments to their maximum. Mutual fund experts often advise individuals to stay invested in mutual funds until the end of their investment period to reap the most from their SIP investments.

Have you started your SIP yet? Happy Investing!

The coronavirus [COVID-19] outbreak might have created panic in your minds about your term insurance policies. Although the pandemic scenario might be intense, you should not fret about the life cover under your respective term insurance plans. As per experts, the current insurance policies can cover the coronavirus cases until and unless specifically excluded. If you wish to file a claim for the coronavirus infection, the regular process of hospitalization can be followed.

Before you buy term insurance plans to safeguard your family members from the COVID-19 outbreak, let’s understand the top four reasons that re-emphasize the need for term insurance under such a scenario:

Term insurance can let you pay low premium

Term plans can be one of the most affordable insurance products, especially if you buy it directly from your insurer’s online portal. When a term policy is bought online, you can avail the benefits of a low cost. Since the online term insurance plans might not involve any commission and external charges, you can qualify to make a low premium payment.

Another way to pay minimal term insurance premiums can be to buy term insurance at a young age. Since you might be physically fit at a young age, your insurer can provide you with a low premium amount. In simple terms, the fitter the health, the lower the premium.

Term insurance can offer tax benefits

Although a term policy offers tax benefits, you should not base the purchase decision on it. It can offer tax exemptions on the term insurance premium as well as maturity proceeds based on Section 80C and Section 10(10D) of the Income Tax Act, 1961. Let’s take a look at each of the available tax benefits under term insurance plans:

1. Section 80C

Premiums should be paid regularly to ensure the continuous flow of a life cover. As a policyholder, you can qualify to claim a deduction up to Rs. 1, 50,000 on your taxable income.

2. Section 10 (10D)

After the maturity period, you can receive a tax-free amount in accordance with Section 10(10D).

Term insurance can safeguard your loved ones

The primary reason for the formulation of term insurance plans can be the financial protection of your loved ones. If anything happens to you due to the coronavirus outbreak, your family can receive a financial payout. With the payout, your family members can stay protected financially as well as maintain their current standard of living in your absence even if it arises out of the coronavirus.

While term insurance plans can offer you with a lump sum maturity amount, you can also receive a combination of the lump-sum amount and monthly income. Moreover, your insurer can allow you to increase the term coverage every month to meet your routine needs as well as fulfill your family’s life goals.

Term insurance can allow you to incorporate riders

Term insurance plans can consist of in-built riders that can enhance your base policy at the nominal price. In the case of riders, such as critical illness rider or terminal illness rider, you should satisfy the terms and conditions of the add-ons to receive its benefits. On the other hand, if you opt for a waiver of premium rider, your insurer can waive the premium off if you contract the COVID-19 virus. The selected term policy will not lapse, and life cover continues.

To conclude, term insurance can play a significant role in the financial protection of your loved ones during the on-going pandemic in the country. Before you opt for term coverage, check with your insurer if it includes COVID-19 under the policy. Moreover, go through the terms and conditions carefully of the policy document after the purchase.

Mutual fund investments call for some basic level of financial knowledge and stock market awareness. When you decide to invest in SIP, you need to conduct in-depth research at first. Once you have successfully completed your journey of learning about how to invest in SIP, you’re actually only halfway through.

You can use a SIP Calculator to calculate the returns you would earn on your SIP investments and also tells you how much you would need to invest every month to earn a target corpus.

After investing in your desired SIP mutual fund, it is quite essential to track them from time to time. It’s easy to get confused and overwhelmed with the surplus information about mutual funds available freely on the internet. This holds especially true for new investors who are clueless about where to start.

A regular overview of your mutual fund investment will allow you to determine if your SIP investment has performed as speculated and whether you were able to achieve your financial goals with said investment.

Let’s look at some mandatory public disclosures made by mutual fund houses that offer insight on mutual fund investments:

Daily NAV

NAV stands for Net Asset Value. Every mutual fund house publishes the NAV of all schemes on its website and AMFI’s [Association of Mutual Funds in India] website on a daily basis. To establish the value of the mutual fund investment, you can simply multiply the number of units held with the NAV.

Monthly portfolio

Every month, mutual fund houses are required to publish the portfolio of various schemes. This portfolio consists the list of securities a particular scheme has invested in and the respective weightage. This document is called a fund fact sheet or a fact sheet. These sheets help investors to track their mutual fund investments and remain updated about key data points.

CAS [Consolidated Account Statement]

A CAS is a document that provides an investor the details of his mutual fund investments [SIP statement] in an orderly manner. It contains all information regarding the purchase, sale, and other transactions that take place during a mutual fund’s tenure. An investor can opt for monthly or half-yearly CAS reports.

Key changes to fund

There are times when the key attributes of a mutual fund scheme change. In such situations, an email is usually sent to investors informing them about the same. These changes might have an impact on the scheme’s performance. Hence, it becomes essential to evaluate the scheme.

The Indian capital markets watchdog SEBI [Securities and Exchange Board of India] has made it mandatory for all mutual fund houses to offer an exit option to their investors.

Using mutual fund-tracking websites

You can find a lot about how a mutual fund scheme has fared when you compare them to similar schemes in its peer group. You can find this information on aggregator websites too. You can also upload the investment details and receive a snapshot of the scheme’s performance.

While it is crucial to track your mutual fund investments, it is recommended to consult a fund expert too. An investment advisor could offer you sound advise and simultaneously monitor and review your investments.

Mutual funds offer excellent flexibility to individuals in terms of a variety of asset classes and modes of mutual fund investment. That being said, the former isn’t that challenging if you carefully assess your financial needs and goals.

However, a little overlooked yet equally important aspect of mutual fund investments is choosing the appropriate mode of investment. There are two distinct ways to invest in mutual funds – SIP or Systematic Investment Plan and Lumpsum.

Some questions never die. They keep haunting time to time. One such everlasting issue is SIP vs lumpsum. Which approach is better – investment through SIP or lumpsum? Which will generate higher returns in the future? Let’s understand these two modes of mutual fund investment.

At the outset, there is a difference between the cash flow of the two investment modes. In lump investing, the individual has money on hand to dispense. On the contrary, in the case of SIP investment, the individual might not have money on hand but regular surplus expected in future. Whether one opts for SIP mutual fund or lumpsum depends on whether the person has regular savings or lumpsum amount of liquid money at the moment to invest. You can use a SIP Calculator to calculate the returns you would earn on your SIP investments and also tells you how much you would need to invest every month to earn a target corpus. Before you begin wondering how to invest in SIP, let’s understand the benefits of SIP investments over lumpsum

SIP vs Lumpsum

1. No need to time the market

New investors are often when to enter the market. If you invest a significant amount at a time, there’s a higher probability of losing a substantial portion when the market crashes. However, with SIP investment, your money is spread over time and thus, only a part of your investment will face market volatility and instability.

2. Rupee cost averaging
SIP mutual fund permits you to invest at different levels of the stock market cycle. When the market is low, the fund manager ends up buying more units at less price and can sell when the market is at its peak. This reduces the average cost of buying each unit.

3. Power of compounding
You must be well-versed with the phrase of investing – ‘The longer you hold, the higher benefits you reap’. SIP helps to accumulate substantial wealth over a period of time. Since your returns further earn returns, your money gets multiplied over some time.

4. Instills the habit of investing
Since investing in SIP mutual fund requires an individual to invest a particular amount regularly, it instills a sense of financial discipline and helps you to meet your financial goals.

5. Easy on your pocket
SIP investment debunks one of the most common myths prevailing against mutual fund investment – you need an awful lot of money to invest in mutual funds. In fact, you can invest the money as low as Rs. 100 per month.

Conclusion

SIP or lumpsum depends solely on an individual’s personal goals, investment horizon and risk appetite. Whichever investing mode you decide to choose, make sure to run it through with your mutual fund advisor.