7 Facts About Systematic Investment Plan

Investments are a boon to the public, especially when they provide guaranteed returns. It becomes easy for them to invest a small amount and see it multiply over the years, along with interest. Since most of the people have different financial goals, they must choose investments that help meet them. A systematic investment plan is an organised manner of investing regularly in mutual funds. Many a time, people lack the funds for investment. But through these investment plans, they can invest a fixed amount every month in a mutual fund of their choice and see their assets accumulate and grow. Here are seven facts about the investment plan: Safety: Investing in SIP is safe, especially for risk-averse investors. If they invest lumpsum amounts, they could pay a high price depending on the market situation. They can invest in mutual funds when the market has no overvalues. They need to have adequate knowledge and choose the right method of investment. Taxes on returns: Taxation depends on the type of mutual fund and the timing of redeeming the investment. Returns from equity mutual funds have no taxes if redeemed after a year of investment. But premature redemptions have 15 per cent tax on their gains. Taxes for SIP plans depend on individual assets and include separate calculations for each. Discontinuation: Investors can decide to stop their investments at any time. After that, they can either redeem their money from the mutual fund or remain invested in it. Tax benefits: Investors using SIP investment in tax saving ELSS mutual funds can claim tax deductions up to INR 1.5 lakh under Section 80 C of the Income Tax Act. They should ensure the total of all their investments in a financial year is INR 1.5 lakh, but not exceeding the limit. Online application procedure: With technology becoming so advanced, people can also choose to invest in SIP mutual fund online. They must sign up on the website and upload necessary documents (PAN card, address proof, and bank statements) and choose the desired fund. They need to follow the instructions and can also track their investments. Lock-in period: While investing in an open-ended mutual fund, there is no lock-in period for the investment. It depends on the type of mutual fund. Some of them have a lock-in period; for example, ELSS mutual funds have a three-year lock-in period. Long-term investments: Many mutual fund apps have the option for investors to choose investments for long tenures. Instead of waiting and accumulating money to invest, they can start investing whatever they can save. The short-term market volatility will not affect it.