SIP by sip

Mutual Funds | admin | December 12, 2011 at 8:15 am

Sip your way to wealth. This seems to be the latest investment mantra of India's small and conservative investors. After all, having gone through all those years of ups and downs and experienced all sort of volatility, they now need some fixed and logical way of investing, which won't only promise them good returns but also ensure their safety. And SIP seems to be a way out!

Simply put, systematic investment plan (SIP) is a simple, time-honoured strategy designed to help investors accumulate wealth in a disciplined manner over the long-term and plan a better future for them. No wonder they have always been in the news.

Says V Ananthkrishnan, chief investment advisor, Religare Finvest Ltd, "SIPs have always been in the news since their launch, but they gained popularity in the later stage. The rollercoaster ride of the stock market took investors all through the highs of 12,500, then to the gloomy 9,000 level. This volatility made many investors lose their money."

This shifted the investors' focus towards SIPs. "Routing one's money via a SIP makes it a better option as it doesn't become a heavy burden on one's wallet, as with rupee cost averaging, the average cost of purchasing the instrument is brought down significantly," he adds.

Besides, SIPs are believed to be an ideal investment avenue for common investors. Says Arjun C Marphatia, CEO, Quantum Asset Management Company, "A SIP is an ideal investment avenue for common investors who may not be have a large amount to invest at one go. Moreover, SIPs inculcate the habit of disciplined regular savings and with the increase in awareness of investing and saving for the future, they have gained in popularity too."

Also, compared to a bank recurring deposit, where interest is taxable, investments in SIPs may generate capital gains, and long-term capital gains from mutual fund units are tax-free. Additionally, some offerings do not levy any entry load. So, there is no additional cost to the investor and the entire amount subscribed to by the investor is invested, giving him an added advantage.

Thus, with the rise in popularity, most of the fund houses today offer SIPs in various options, including Principal Income Fund, Monthly Income Plan, Child Benefit Fund, Balanced Fund, Index Fund, Growth Fund, Equity Fund and Tax Savings Fund.

Source: Economic Times