What is sip Mutual Funds? How to choose perfect sip Funds in 2020

Which is better FD or sip? What is SIP in mutual fund with example What is SIP mutual fund and how it works What is the difference between mutual funds and SIP
What is SIP Mutual Funds

If you are also planning to invest in mutual funds, then you must know about sip, and that's why in today's beginners guide, I am going to tell you about sip. Like what is sip and how can you invest in it, how to choose the best sip funds. In today's article, I will tell you all the information related to sip in detail.

I know that all of you are looking for a better investment route to make your future brighter. So you should read this article carefully. And if you haven't read our previous post yet, then definitely read it, whose link is given below.


what is SIP?

The full form of sip is a systematic investment plan. SIP is a way to invest in mutual funds. In which you can invest a certain amount of money in your preferred fund in a fixed interval.

SIP is one of the most popular mutual funds in India. Because most of the people living in India fall in the medium category. And sip is a way in which all the poor and rich can invest. So let's understand sip with a simple example.

Suppose that your monthly income is 10 thousand rupees, and you want to invest some money out of it. So here sip is a way through which you can invest in Mutual Funds even more than 500rs.

Whenever we invest in sip on monthly basis, then every month 500rs are deducted from your bank account and automatically invested in the mutual fund. And whatever returns of money you invest on monthly basis are also invested in mutual funds.

In this way, by the time your sip mutual fund expires after 5 years, the money you have invested becomes a lumbsum amount, which you can withdraw from the mutual fund.

So this is how sip mutual funds work, let's now know why we should invest in sip.


why we should invest in sip?

As I have already told you that sip mutual funds are very popular in India, there are some reasons why it is popular, let's understand all the points one by one.


investment with small amount

Through sip mutual funds we can also invest with a small amount of 500rs. As there are more number of middle class families in India, and this is why sip mutual funds are very famous in India.


power of compounding

Albert einstein reportedly said that - "compound interest is the eighth wonder of the world". When we and you invest in sip, then you also get returns from it, it is reinvested in mutual funds and consequently a lumbsum amount is collected after a long time. In which you see the benefit of compound interest.


Experts Knowledge

Now everyone does not know about the stock market and real state, people like you and without me can not guess correctly that which company will be going to grow and in which to invest.

If you invest through sip mutual funds, then your money is given to an expert fund manager who has good knowledge of the stock market and real estate and who earns good returns by investing your money in the right place.


security by SEBI

If you are investing in mutual funds then you do not have to worry about any kind of security of your money. Because SEBI keeps a close watch on all types of activities of mutual funds.

So far you have learned why we should invest in sip and what are its benefits, now let us know what are the disadvantages of investing in sip.


Disadvantages of sip

To invest in a place, just to know its benefits is not enough, before investing, you need to know both the advantages and disadvantages and the following disadvantages of sip which are given below.


low returns

When the stock market goes up, sip returns do not perform well, compared to them lumbsum investments give good performance. 

You can guess from this point that if you invest 1lakh of lumbsum on 12 basis, then you will get returns of 1.72 lakh and if you have invested in sip on 12month basis then you will get only 1.37 lakh.


No returns in short time

If you make a short time investment in sip then you do not get any benefit in it because you do not get the benefit of compounding.

You should invest for more than 10 years for a long time to get good returns through sip.

Note : Mutual funds always give better returns than fd. Invest in any number of bad mutual funds, if you invest for a long time then you will always get good returns from that fd.


Market Risk

Whether it is stock market or real estate or mutual funds, no risk is free. But where does one go about mutual funds that if you invest for a long time, you will never have to face loss.

When the stock market is falling, then all the investors start to withdraw their money due to panic and sell their shares at a low price and get into losses.

And with the money of those who invest for a long time, the fund manager buys low price good shares during the downturn in the stock market, and in future the price of the share becomes higher and those who invest for a long time They get good benefits.

So far, you know what sip is and what are its benefits and damages, let's know how you can invest in it.


how to invest in sip

In order to invest in Sip, the following documents are required which are given below.
  • Aadhaar card 
  • Pan card 
  • Address proof 
  • Chack book 
  • Passport size photographs 
With all these documents, you have to go to your nearest mutual fund office and you can open sip account there.


how to choose better fund.

Always you should choose mutual funds based on your goals, if you need more money in less time for which you have to take risk, then you should invest in funds with higher returns where risk is also high.

If you want to save money for your good future and also want to earn good returns from them, then you should invest in low risk funds where returns may be less but risk is low.

ConclusionI hope you liked our post, if you liked this information, then do share it, and comment how you liked this post.

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