It is very hard to earn money, but it is even harder to decide what you should do with the money that you already have saved. You have two options – either you can leave it in the bank account and get 4% interest, or you can invest it in any financial instrument and get more interest and mutual funds are one of the best financial instruments out there.
Mutual Fund is a type of pool where the money comes from different investors for investment with different security plans. SIP i.e. systematic investment plan is a way of investing in mutual funds. Many people get confused between SIP and Mutual funds; they don’t know that these two are different things but somehow interconnected.
Let’s discuss mutual funds and SIP in detail.
Mutual funds are very popular across the globe nowadays. Here, the money is pooled and then invested in other stocks and bonds. This investment in stocks and bonds is then divided into units which an investor receives according to their total cash investment. Net Asset Value (NAV) is used to measure the value of mutual funds. According to NAV, an investor buys and sells the mutual fund units. You can ask your fund manager to invest your money in an equity mutual fund.
There are 2 types of mutual funds:
- The Debt Mutual Funds: In this type of Mutual Fund, the fund manager invests your money in fixed income securities. Here you get the lesser returns than the equity mutual fund, but the rate of risk is comparatively very low.
SIP – SYSTEMATIC INVESTMENT PLAN
SIP is a process and alternate method by which to invest in Mutual Funds. A person usually invests a predetermined amount of money at a regular interval of times for a fixed duration. It totally depends on the person; they can either invest once a week, monthly, quarterly or half yearly. SIP is the best way to save your money and earn a good return on investment.
- You will be provided with a certain number of units, based on market status. (It is known as NAV of the day)
- You will be able to invest through SIP in any mutual fund of your choice.
When stock markets are high, you get less number of units of the equity mutual fund and when the market falls, you get a higher number of units – because the cost of these units will also rise and drop. If you invest in debt mutual funds, the profit will not go through all these ups and downs and it will be like a recurring deposit. In both cases, SIP will give you all the accounts of your investment and interest.
Many people ask – ‘how can they invest in SIP online?’ It is very simple and there are many reasons to choose online SIP investment platform. Many people think that they cannot deal with paperwork so with SIP online their work becomes very easy and smooth.
- To invest in online SIP, firstly you have to apply for KYC (know your customer). KYC is very important if you want to invest in mutual funds. (Requirement: Address proof, ID proof, and a photograph)
- After completing the KYC process, visit any fund house website and search for the registration. It will take you to a simple form for creating an online account with that respective house.
NOTE: The link for creating an account is usually located below the login button.
- After registering your mobile number, you will receive an OTP on your phone and you also have to enter your bank details. So it’s better to keep your phone and cheque handy.
- After your account has been created, log in to the site using your username and password. You can now select the mutual fund scheme and start investing.
There are many plans available in the market but the best SIP Plans are:
– SBI BlueChip Fund-Reg (G)
– Franklin India Equity Fund (G)
– Mirae Asset India Equity Fund-Reg (G)
– HDFC Mid-Cap Opportunities Fund (G)
– ICICI Pru Bluechip Fund (G)
- A person can invest their money in mutual funds using a systematic investment plan (SIP).
- SIP is associated with mutual funds but it can also be used to invest in other stocks through it.