The Buyt Desk
Investing in shares of fortune companies is indeed heaven. But did you know the share value of these companies ranges in thousands? One share of Honda Motor Co Ltd.’s is
Rs 3,302 and that of, Maruti Suzuki, Rs 8,801. How would you buy their shares when you have a limited corpus?
The Mutual Fund Systematic Investment Plan is an answer to this. You can use many facets of SIP to buy shares of these highly valued stocks by investing a minimum sum.
You can start SIP with as small as Rs 100, however, the investment amount and tenure depend on your financial goal. The SIP calls for a monthly commitment. Some funds let you
Invest with as little as Rs 100. There are many facets of SIP that gives an advantage to investors.
You Can Withdraw Funds Without Stopping SIP
Two types of mutual funds are there, open-ended funds and close-ended funds. The open-ended funds give investors the flexibility to enter and exit the fund at any point in time. It comes with no fixed maturity period. This type of mutual fund allows investors to withdraw the amount from SIP anytime without stopping it. The fund houses offering this service follow the FIFO method for withdrawal, i.e. first in and first out. Units invested first can be withdrawn first. The fund houses give this option to save investors short-term capital gains tax as much as possible. This investment model turned helpful to investors during the COVID-19 period when people saw a fall in income. In such a situation, the pause feature of SIP helped investors.
They stopped it for some time and restarted it when their income regularized. In this option, an investor can pause the SIP for 3-6 months. The maximum gap time for this is six months.
All SIPs ELSS Are Locked
Similar to lump-sum, the SIPs also come with lock-ins and capital gains tax. In equity-linked saving schemes, there is a locked-in of three years for all investments. It applies to SIPs also.
E.g., a SIP starting in an ELSS fund in 2022 will become lock-in-free in 2025. The next instalment will become lock-in free in 2026. Investors can withdraw the accumulated amount from ELSS only when all their instalments will complete the three-year lock-in.
Debt Fund Also Come With the SIP Option
Debt funds are considered the safest of all mutual funds because of the low risk and better returns it offers. And fund houses give the facility of investing in debt funds via SIP. It is better than a fixed deposit. The crux is investing in mutual funds through SIP is thoughtful if you have all information about Mutual Fund SIP facets.
