SIP Calculator

01. What is SIP?

SIP (Systematic Investment Plan) is a way of investing a fixed amount on a monthly basis in mutual funds. All you need to do is choose the amount, choose a fixed date, and your SIP will get started. You can stop your SIP anytime or increase/decrease it whenever you wish to. The pre-defined SIP intervals can be on a weekly/monthly/quarterly/semi-annually or annual basis. The minimum amount to start SIP is Rs. 500 with no maximum limit.

For Example, Like If you take an SIP of 5,000 for 1 year on Jan 1, 2020, you will be paying Rs 5,000 per month for next 12 months.

02. When should one invest in mutual funds through SIP?

Investment through SIP must be done only when markets are uncertain or very volatile, when you don’t know which side they are headed to. SIP will be beneficial only if markets are volatile or going down after you have invested. If it happens that markets turns bullish and starts going up, in that case SIP will not be beneficial and will give less return compared to lump sum investment in the start.

03. Difference between SIP Investment and One-Time Investment

SIP Investment	One-time Investment
Periodic investments in a tenure	One-time investment in a tenure (lump sum)
Earns better during market lows	Earns better during market highs
SIPs can protect investments from potential market crash	One-time investments can lead to major loss during market crash, which happens often enough

04. Does all investment through SIP have Tax Benefit?

No, all investments through SIP doesn’t has tax benefit. Only investments in ELSS (Equity Linked Savings Scheme) through SIP have tax exemption up to Rs. 1.5 lacs annually under Section 80C of Income Tax Act, 1952.

05. Does SIP mean investing only in equity mutual funds?

Generally when it comes to starting an SIP, there is always a misconception that the money is getting invested in equity mutual funds only. This is not at all true. SIP can be started in equity, debt or hybrid scheme. Investing in these schemes means that how much risk you as an investor ready to take so that your money grow in leaps and bounds.

06. What if I miss my SIP dates or don’t have sufficient money in my bank account?

The auto-debit feature in our SIP scheme is the best feature. The money automatically gets deducted from our account on a given date. So, in this way we just need to make sure that the SIP amount is there in our account before the SIP date.

However, just in case for whatever reason the funds are not available in your bank account and you will miss the SIP deduction then bank will charge the penalty for that particular month. Your SIP account remains active even if you miss one SIP date but after multiple misses, it gets cancelled. Always remember that the mutual fund has nothing to do with the penalty. It is only the bank who charges the penalty on bouncing of Electronic Clearance System (ECS).

07. Can I reduce my SIP amount?

Unfortunately No. You cannot reduce an SIP amount under any circumstances. Suppose, you have started an SIP of Rs 1000, then one cannot reduce it to Rs 700 or Rs 500. The only solution left with the investor here is that they will have to stop the current SIP and then again start an SIP of the desired amount.

08. Can I withdraw money from SIP whenever I want?

Withdrawing money from SIP depends on which fund we have invested. If we have invested money in ELSS then it has a lock in period of 3 yrs. Every SIP installment has a lock in period of 3 yrs and you cannot withdraw before 3 yrs under any circumstances. If the money is invested in debt fund then it doesn’t have a lock in period but it may have an exit load (or penalty) of 1% to 2% if the money is withdrawn before a stipulated time such as 1 yr, 2 yr etc…

09. Which is a better option, RD or SIP?

So to put it straight, many will say RD is better because it is not a risky investment and many will say SIP is better because if an investor does SIP in equity funds, as it is directly linked with market so it becomes a risky investment because risk totally depends up on market. If the market is up then it will generate good returns and if the market is down then your returns can also come down. And at times returns can come lower than RD returns. So it totally depends on the investors risk appetite. If the investor can have high risk appetite then he/ she can go with equity funds. Always remember that if a product is giving high risk then returns from such investment can also be high depending upon market and funds performance. And if the investor doesn’t have risk appetite then he/she can go with the RD investment as it has negligible risk.