1. Affordability: Now a days investment in Mutual Fund with mere Rs. 100.00 per month is possible.
2. Portfolio making: By investing in Mutual Fund one can access to a diversified portfolio even with very small amount of investment.
3. Flexibility of investing: By changing investment decision with respect to entry and exist in Mutual Fund.
4. Transparency: Mutual Fund is well regulated and monitored by the market regulator SEBI.
5. Expert Management: Experienced professionals are employed by Mutual Fund Companies (AMC’s) for managing investment made by Mutual Fund Investors.
What are the main characteristics of SIP?
SIP investment involves two important elements. One of which is investing in systematic way i.e. with predefined frequency or intervals which may be on monthly SIP akin to recurring deposit. The SIP may also be made on quarterly basis. The most attractive features of SIP is, it can be made on daily basis also which gives an investor scope to manage his investment decisions more effectively with affordable budget. The budget for a SIP may be as low as Rs. 100 per month. The second important element of SIP is planning element. Here planning is with regard to Financial terms i.e. Financial Goal. The investor should target his Financial Goal at time of making SIP and should continue the SIP investment for predefined period to reach his Financial Target.
Why SIP is preferable in Mutual Fund?
SIP in relation to Mutual Find stands for SYSTEMATIC INVESTMENT PLAN. It is a planned investment strategy to invest in systematic way, in suitable frequency ranging from daily, fortnightly, monthly, quarterly etc. This is so designed to ease the affordability of investors. This is also helpful to absorve the volatility of market.
What is NAV of Mutual Fund?
NAV in relation to Mutual Fund stands for NET ASSET VALUE. It is the realizable market value of each unit of investment. And it is the ultimate value that an investor acquires from his investment.
What is Unit of investment of Mutual Fund?
Units of Mutual Funds are allotted to an investor on the date of investment depending on the NAV of such date.
For example one SIP of Rs. 1000.00 will fetch 200 units of a scheme hich is carrying a NAV of Rs. 50.00 per unit.
Is it possible to accumulate 1 Crore by investing Rs. 3000.00 per month?
Investing in 30 years term with a monthly SIP of Rs. 2,861.00 can fetch 1 Crore rupees at 12% annual compounding.
Mare deferment of starting by 5 years , i.e. investment for 25 years compels investors to invest almost double monthly SIP of Rs. 5,500.00 to reach the targeted corpus of 1 Crore rupees at 12% annual compounding.
In 20 years term the monthly SIP requirement will be Rs. 10,500.00 and in 15 years term the monthly SIP requirement will be Rs. 20,500.00.
How Return from Mutual Fund investment is determined?
As usual, return from investment, which bears market risk, is determined by deduction of cost from its realizable market value. The return from investment of Mutual Funds is determined by the product of units of Mutual Fund with the difference in NAV of such Mutual Fund as on the date of purchase, representing cost and NAV as on date on which return is calculated, representing the market value.
Can Mutual Fund investment save Tax?
There are certain categories of Mutual Fund investments which are called ELSS, Equity Linked Savings Scheme. Such investments are eligible to deduction under Income Tax Act under section 80C. At the same time such investments bear a 3 years lock in period.
Is there any lock in period for Mutual Fund Investment?
Except the ELSS Schemes of Mutual Fund there is no lock in period. Some of us called the Close Ended Scheme of Mutual Fund as lock in period, though there is a specific period but actually such investment has a predetermined date of maturity. But such period should not be termed so.
What are the five Golden Rules for investing in SIPs?
1. Start early which helps smaller allocation to investment plan enabling one in managing relatively small income in the beginning of one’s carrier.
2. Link One Investment to one goal it helps one to analyze his investment on regular basis to know how close he is for accomplishing his targeted Financial Goal and take decision accordingly.
3. Stay committed for long term which helps investor to take the advantage of the power of compounding.
4. Diversify investment according to risk appetite and time horizon to reach Financial Goal.
5. Avoid taking decision based on market movement by staying invested and remaining calm in market turmoil.
What are the factors to be considered for making allocation of asset in Mutual Fund?
Time Horizon i.e. how long one is willing to stay invested.
Risk tolerance of the investor in facing market risk
Financial condition of the Investor including the lifestyle and asset.