A Systematic Investment Plan is the safest way to invest in Mutual Funds.
With an SIP, investors can invest a certain sum, small or big, in Mutual Funds over a specific investment tenure. A monthly Systematic Investment Plan can help investors beat market volatility. This is possible because investments in SIPs take advantage of rupee cost averaging.
Need to know a few benefits of investing in Systematic Investment Plans? We can help you there.
Systematic Investment Plans make you a disciplined investor
It is an open secret that investments are more rewarding than savings. Putting aside money in a Systematic Investment Plan makes you a disciplined investor by creating a financial commitment. Why SIP? Investing as you earn gives you great returns. If you are drawing a steady salary, why not invest monthly, then? So, take the SIP route.
Systematic Investment Plans don’t require a large investment amount
If you choose to invest in a Systematic Investment Plan, you can invest as little as Rs. 500 every month. This flexibility in the investment value makes Systematic Investment Plans easy on your pocket, doesn’t it?
Additional Reading: Savings vs Investments
Systematic Investment Plans don’t require investors to time the market
This means an SIP is the ideal investment product for investors who prefer not to worry about market trends and volatility. With SIPs you don’t need to constantly monitor market fluctuations.
Tax savings? You got it
Choose to invest in Mutual Funds with Equity Linked Savings Schemes and get tax benefits up to Rs. 1,50,000 under Section 80C of the Income Tax Act. But wait, investments in ELSS have a lock-in period of 3 years. That shouldn’t be too bad because it is the shortest lock-in period among tax saving investments.
Do ensure that you don’t need the invested money in a hurry because investing in ELSS through SIPs means that each SIP investment that you make is locked-in for a period of 3 years.
Pause your Systematic Investment Plan
Now let’s say you find that you need to pause your Systematic Investment Plan at any point during the investment tenure.
A few Mutual Funds now offer investors the flexible option to pause their SIP investments for a specific limited period. This affords an investor temporary liquidity and the Systematic Investment Plan restarts after the completion of the hiatus period.
How long can you pause a Systematic Investment Plan for?
A Systematic Investment Plan can be paused for a certain period of time. This time period is generally decided by the Mutual Fund house.
Documents
In order to create the pause in an SIP, an investor will be required to fill out a SIP Pause Form. This document can be obtained from the fund house. Alternatively, you can download this form from the Mutual Fund website.
Filling out the form
The date of commencement of the pause in investments and the end date (the pause period) must be mentioned clearly on the Pause Form. This will help the fund house suspend the standing instruction for debit to the investor’s account during the pause period.
Submission of the form
An investor who wants to pause a Systematic Investment Plan will need to submit the completed Pause Form to the Mutual Fund house at least one month before the SIP date from which the investor wishes to pause the investment.
Resuming the SIP
At the end of the SIP’s pause period, the investment will be automatically resumed with the same terms and conditions as when the SIP was initially started.
Additional Reading: Understanding Mutual Funds
What you should remember
Don’t forget to find out whether your chosen Mutual Fund offers the option of pausing a Systematic Investment Plan. Not all Mutual Funds do.
There’s more. A Mutual Fund will permit investors to pause a Systematic Investment Plan only one time during the investment term of the SIP.
Begin investing in Mutual Funds with a Systematic Investment Plan and get on the road to financial success.