What is SIP (Systematic Investment Plan)?
The SIP is an innovative way to invest your money in stocks. It spreads your investment over a number of stocks which helps you build a diversified portfolio.
The extra advantage of SIP is that you don’t put all your eggs in one basket as it distributes your investments evenly every month. SIP reduces volatility (risk) followed by a higher return for the customer and thus becomes the best tool for building long-term wealth
SIP is simply a mechanism that helps you invest in mutual funds over a period of time. One can invest in a mutual fund through SIP, which allows you to invest a pre-decided amount automatically every month or quarter from your bank account.
You will be making a recurring investment on the same day, at the same price, for the same number of units, and for the same fund, without worrying about this date being chosen by you! Before starting a SIP, you should select the mutual fund schemes based upon their return performance.
What is SIP Calculator?
SIP Calculator helps you calculate how much money you need to come up with upfront and on an ongoing basis to make monthly payments on your mortgage. It is really user-friendly and easy to use. Simply plug in your Credit score, Loan amount, interest rate, and tenure of the loan in the calculator.
SIP Calculator enables you to calculate your monthly fixed expense in respect of Equity Linked Saving Schemes. It also provides a simple method to compare the contribution for different investment plans and choose the most effective payment option for you.
How does SIP Calculator Work?
This calculator provides an estimate of monthly EMI based on a principal investment amount and time span. The financial calculator is perfect to calculate SIP investments of different asset classes like Stocks Mutual Fund, Public Provident Fund (PPF), Gold/Silver ETF, Fixed Deposits and Bonds, etc.
Setting up a SIP account is quick, simple, and easy. It takes only 2 steps to begin saving towards your long-term goals.
With your investments and every time you use your TCF ATM or debit card, TCF will automatically deduct your contribution amount. So each time you swipe, you’re building your investment portfolio.
Types of SIP?
SIP is really about making your financial future more secure and less risky. If you want to make the most of your SIP, it is important that you understand the types of SIP available. Here are some of the most popular ones:
Fixed maturity plans: These plans have a maturity date at which point the depositor can withdraw his entire money or can continue to get regular deposits till he attains maturity. The rate of return is fixed in these schemes.
The money received is tax-free and any additional money received is also tax-free in the case of senior citizens. A few such plans offer guaranteed returns as well, but these are usually low.
Example: Fixed Maturity Plans (FMP) by banks, especially suitable for senior citizens
Disclosure Guarantee Deposits: These types of deposits provide a certain amount of interest rate for the entire duration of the deposit tenure. The interest rates are linked to Government bonds. In case of a default by the bank, the depositor gets back his principal amount along with interest accrued on it up to a certain extent.
No further deposits or withdrawals can be made once this plan is subscribed to. This type of deposit is suitable for senior citizens because it provides them with a fixed income.
Benefits of Investing via SIP?
With SIP, you can invest a little bit of money on a fixed date every month and take advantage of the power of compounding to build your wealth over time.
SIP helps you invest in a systematic way so that you can grow your money without worrying about how much time has passed or whether the market is up or down at the moment. Investing via SIP is quick and easy. It takes just one call to set it up and then a monthly reminder.
How to invest in SIP?
If you want to invest for the long term, then a SIP is your best option. A monthly SIP offers you the ability to stick to our investment discipline and time in the market, which offers superior returns over the long term.
Is SIP Better or a Lump Sum?
If you are not into crunching the financial numbers then doing the extrapolations, then SIP is better than lump sum as it provides you with a disciplined way to invest a fixed amount every month over a long period of time. We know that SIP’s can be better than lump sums, but how much better?
1) Lump Sum Investment – An amount can be invested at one time or over a period of time. Usually, it is invested at one time.
2) SIP Investment – Investing in an equity fund via a Systematic Investment Plan involves a series of investments over a period of time. The investor invests a fixed amount on a monthly basis into the scheme and so there is no need to worry about selecting the right time to invest or how much to invest when investing in equity mutual funds through Systematic Investment Plans.
3) Lump Sum Investment – In the case of lump sum investment, the entire amount is invested at one time but with SIPs the amount is spread out over a period of time.
4) Easy to stick to. A simple rule like “Invest x amount every month” is easy to follow. You don’t need to monitor the market daily to invest at the right time or check your portfolio value from time to time to know when to invest or if the value has gone up or down. Just follow the monthly pattern and you are done with it for that particular month.
5) You won’t miss out on the big gains: Many times we miss out on huge gainers simply because we were not aware about that particular stock/fund/commodity when it was rising rapidly or we were too busy doing other important
SIP is a must for beginners. You do not need to know about the market and how to invest in it, you just need to follow the fund or index that you have invested in. At first you may be nervous about the fluctuations of your investment, but don’t worry, SIP will take care of that for you. It is better than lump sum investments because with lump sum you take risk on market fluctuations while with SIP you make sure that your investment remains intact
How is SIP calculated?
When it is time to calculate the SIP, you need to take into account the daily average balance over a period of 15 days. This average will be divided by 15 and then multiplied by the number of days in that quarter. The amount is then divided by 365 and that is your interest rate. The formula: Daily Balance x 15 / Quarter Days = Daily Average Balance Daily Average Balance x 100 = SIP SIP x 365 = Interest for the year
Simply put, SIP means the time period over which you have invested in your mutual fund. It is also referred to as the time lag, or return period. It may be months, years or even decades. The SIP amount is calculated based on the number of units that you have bought so far and the purchase value.
For instance, if you have invested Rs 50,000 in a mutual fund scheme with a SIP of Rs 1,000 per month for five years, then your SIP is Rs 60,000 (50,000 + (12 x 1,000)).
The investment made in one year will become part of your long-term capital gains (LTCG) from the next financial year. The tax liability depends on whether an individual has invested via an eligible NPS account or not.
However, since SIPs are considered recurring deposits and not investments as such, they are only eligible for long-term capital gains tax exemption under Section 54EC of the Income Tax Act provided you have followed these conditions: You should not have claimed any exemption for subscription to the scheme earlier; You should not have claimed any deduction for subscription to this scheme under Section 80C of the IT Act;
