New Delhi | Sugandha Jha: Everyone wishes to earn money to fulfill their dream of a car, house, or a secure life post-retirement. Investing in mutual funds through a Systematic Investment Plan (SIP) can be a simple way to help you achieve your dreams. SIP is a systematic method of investment wherein a fixed amount of money is paid periodically. It can be done monthly, quarterly, or semi-annually. When you invest steadily in this manner, it becomes easier to meet your financial goals.
To know more about SIP, its process, and the risk associated with it, we bring you an expert's opinion from one of the best Certified Financial Planners (CFP), based in Ghaziabad, Jitendra Solanki. In an exclusive chat with Jagran English, Mr. Solanki answered some of the frequently asked queries related to SIP Mutual Fund.
Question: What is your opinion on investing in mutual funds through SIP.? How suitable do you find it?
Mr. Solank: SIP is a very good mode for investing in a mutual fund, especially for salaried individuals. Since SIPs are on automatic mode, a forced saving is happening through which people can generate a good return. Also, it helps people to build discipline. Every month, some amount is going towards investment, which is going to help them in their future goals. All this helps an individual to build a good saving habit, which is essential for long-term investment.
Question: Can you explain the process of SIP for our readers? How should a layman planning investment should go about it?
Mr. Solanki: If you want to invest in a mutual fund through SIP, there are different modes you can choose. You can make an account on the respective mutual fund company website. If you are investing for the first time, you will have to complete a KYC process, which some companies allow to do through an online process also.
Once you complete that KYC process, you can open an investment account where you will have to register your bank account for an auto-debit mandate. After this, you can start investing in SIP. Via the auto-debit mandate, a certain amount of money is debited from your account on a particular date and invested in a SIP.
Another way is to use apps or online tools where you can invest in all the mutual fund schemes through a single window.
Question: Which income group should better prefer this option of investment?
Mr. Solanki: Largely, people who have a long-term accumulation period (15-20 years) can invest through SIP in mutual funds. I don't think it is for any particular group. It depends on whether you have lump sum money to invest or can invest only a particular amount monthly.
Question: How much investment on a monthly basis do you suggest in SIP to get a substantial amount in a given period of time?
Mr. Solanki: The amount of money you should put in SIP monthly depends on your goal accumulation. For example, if you want 50 lakh rupees after 15 years, then you will need to invest Rs 5000-10000 per month. The amount of savings per month is linked to the end objective you wish to achieve.
Question: Is SIP a safe option for investment?
Mr. Solanki: With respect to capital, safety is there. However, there can be periods when markets are down. But if you have invested for a longer horizon, then you can consider it to be a safe investment. Research says if you are invested for 1 year in the equity market, your return variation is anywhere between -50 to +50 per cent. But if you have invested for 15 years horizon, your rate of return is 2-17 per cent. That means if you have invested for the long term, safety does come in. You just need to be patient.
Posted By: Sugandha Jha