Understanding SIP Investments In Three Simple Steps

Investors often have the notion that SIP is an investment in itself. It is a blunder to believe in such a myth. An SIP serves as a method of investing in mutual funds rather than being an investing mechanism. SIP is a special friend to the investors who are beginning their career and investment as well. We all know when a person takes up a job as a fresher, it is practically not viable for him/her to opt for lump sum as an investment method. However, they are paid enough to pull out a small amount from their salary to be invested monthly via SIP. Hence, penny by penny they can contribute towards accumulating a huge fund.

Automation is being widely accepted in almost every field, whether it may be education or investing. With the introduction of online investment strategy, the clients are able to get more freedom of investing as compared to the physical path. The investors can manage their money, decide the scheme in which they want to invest and also make the payment through various online mechanisms being extended by the banks.

Process of online SIP investment?
The online investing mechanism has undoubtedly decreased the tautness of clients. Mr Sharma was trying to find an answer to the question of how to invest in SIP, when his friend, who was already an investor, visited him. Mr. Sharma shared his dilemma with is friend and to satisfy the query his friend explained the following process involved in how to invest in SIP.

Analyzing your requirements
For taking the correct investment decision and choosing an appropriate scheme, the clients need to understand their requirements. It is rightly quoted, “An investor without an investment objective is like a traveler without a destination”. This phrase signifies the importance of having an investment objective before commencing the process of investment. Each individual has different nature and thinking. In the same way, every client has varying investment needs like some might invest to multiply their money manifolds to buy a property in the long run, while a few may want to save tax along with investing, etc. The reason may be any, but the realization of that need is necessary because it serves as the basis of selection for the type of scheme. Mutual funds have launched various schemes in order to suffice the needs of all investors. Thus, to select one of the plans from the wide range, clients have to identify their aspirations from the money they tend to invest.

Creating a personalized portfolio 
As you file all your documents in a folder manually, there is an online folder known as portfolio which holds a list all your investments including stocks, bonds and cash. There are two types of portfolios first, it is concerned with a scheme. The portfolio of a scheme holds the investment records of a particular plan. It managed by the fund managers and gives the information of the sectors where the scheme tends to invest. The client has no interference in the investment strategy and portfolio management of a plan. Second, is a personalized portfolio where the client’s investment details are recorded. When using an online investment strategy the clients enjoy a liberty to manage it according to their preference with the help of experts. A strong portfolio with a less number of scripts is far more better than the one with inappropriate and more number of schemes. Hence, creation and management of the portfolio can be done with the help of experts even in online investing.

Realizing payment in a safe manner
There are a lot of facilities have been launched by banks to provide handy service for their clients like ATM, debit/credit card, NEFT, RTGS, etc. All the facilities allow the clients to have a better approach to the bank transactions and making them easier to execute. With an increased use of online methodologies for buying and selling, clients require a secure payment mode. This not only reduces the time but also ensures that the payment is carried out through a safe mode. The same concept is applicable in online investing option also. The clients need not stand in long queues and wait for long first to withdraw and then to deposit the money. With the help of any of the online transaction facilities an investor can transfer the money safely from one account to the other.

The three-tier process depicts the overall working of an online investment strategy. The clients have the chance to be more independent and can adopt a secure investment avenue for their hard-earned money.

Get a better insight for organizing your investments

Have you ever seen a construction site? It is amazing to see how a sky-scraping building is constructed by placing the bricks in the right places. “Take care of small things and big things will automatically fall in place”, is a traditional saying which emphasizes on streamlining the tasks which appear to be small but produce a greater impact over the time. For example, for attaining a building, according to the plan, each brick has to placed accurately.

In the same way, investing is an activity that requires consistency and patience to attain desired gains. Mutual funds have been serving as one of the most secured ways of investing in stock market, bonds, securities, tax savers, etc. The clients can fulfill their needs with the help of investing in any of these instruments. Along with providing varied avenues of investing, mutual fund provides two methods through which the clients can place their money in any of the selected scheme viz, Lump Sum and SIP (Systematic Investment Plan).

What is SIP?

It is a method of depositing small amounts on a regular basis in any of the schemes selected by the clients. SIP was initially introduced to make the investment process easier as numerous clients are willing to sacrifice a huge sum at a time. This mechanism not only waves off the burden from the client’s shoulders but also makes it easier for him/her to invest more frequently. By investing as low as Rs. 500 through SIP plans clients can enjoy to accumulate a huge corpus over a prolonged period.
Top five SIP plans for 2016

There are a lot of mutual fund companies that provide innumerable schemes to the clients for investment. According to client’s risk-appetite and investment needs the clients can choose any of the schemes to invest their hard-earned money. The mutual fund experts mark some funds as the top SIP plans on the basis of the report of past 5-year performance, NAV index, Portfolio assessment, and Profit/Loss analysis report. There are following plans which have been rated to be the top five plans of 2016 in India:

1. DSP BlackRock Micro Cap Fund: It is an equity-oriented scheme which invests in small-cap and mid-cap companies. This scheme intends to apprehend the profits based on long-term growth potential of the newly established companies. Every small-cap and mid-cap company is in the initial years of business and consists the capability to make progress. DSP BlackRock Micro Cap Fund was initially launched in the year 2007 and has been able to mark its presence in one of the five top performing SIP funds. The AUM of the fund is Rs. 2,004.13 Cr which shows the popularity of the fund. The various options available under this top performing mutual fund in India are Growth, Dividend, Payout, Reinvest. There is an exit load of 1% for the investors who withdraw their money before the period of 12 months. 
2. Tata Balanced Fund: A balanced fund is one of the funds lying under the hybrid category whose major investments are in equity and relatively less portion is being invested in money market instruments. Equity investments provide the much-required growth of funds through capital appreciation while on the other hand, money market instruments facilitate fixed income benefits. Tata Balanced Fund is one the top performing funds under the hybrid funds category. The scheme is an open-ended fund and has 65:35 ratio of equity and debt respectively.         
3. ICICI Prudent Value Discovery Fund: This scheme is an open-ended diversified equity fund. Money invested through this fund is wisely diversified across various sectors of out economy like pharmaceuticals, banking, IT, etc. The fund manager contains a list of all those companies that are fundamentally strong and have ethical approach along with offering affordable stock prices. Hence, extending the benefits of capital appreciation over a long period.
4. Axis Long Term Equity Fund: It is also categorized under ELSS category. It has a three year lock in period and was started in the year 2009. There is no entry and exit load and it is an open-ended scheme. The scheme invests in sectors like banking, finance, consumer durable, etc. In a short span of seven years Axis Long Term Equity Fund has been able to make an impression among the investors and attain a position among the five most preferred SIP funds. 
5. L&T India Value Fund: The scheme aims at generating long-term capital appreciation by providing a diversified portfolio of equity and equity-related securities. The Scheme also invests in Foreign Securities in international markets along with the advantage of providing growth and dividend options.

Therefore, the clients should adopt SIP as their mode of investment which will undoubtedly help in accumulating wealth penny by penny over a long period of time. 

UTI mutual fund extending schemes backed with government support

Government security is the one which soothes the citizen’s anxiety. Nothing is better than a government backed up scheme. The elected body holds responsibility for the country’s citizens as they are termed as the welfare unit of any country. Investing solutions provided by any of the PSU would be one of the prime picks of the clients. Along with owning a responsibility of formulating laws aiding the interest of the residents. And thus, the clients also rely on the government and believe it to serve in their favor.

UTI mutual fund was a step forward to bring about government supported financial assistance for the clients. After a lot of efforts put in by Col Akash Behl, UTI bill was given a green signal in the parliament. Since then, for 24 years, UTI had a monopoly of being the only financial institution in India. After liberalization was introduced under the New Economic Policy, PSU banks got the freedom of launching their own mutual funds.

The reliability of UTI MF was shaken after the great drift that came into the stock market owing to the scams headed by Harshad Mehta and Ketan Parikh. But, soon the company regained its position after analyzing the weak points and correcting the same. The management of the company was revamped and a new strategy was formulated to get back the trust of investors.

Facing a tough competition in the market from private investors, UTI mutual fund has been able to mark a significant presence in the mutual fund industry. After a change in the governing strategy UTI mutual fund is now sponsored by four main leading PSUs of the country.

Another most important benefit of UTI mutual fund is that it has experienced staff which is the key component of the company. There are many employees who have been an integral part of UTI mutual fund for a long time. Not only in India, UTI mutual fund is a company which has set its foot in the global market and has managed to collaborate with a foreign T Rowe Price International Ltd. (TRP).
There are various reasons involved in the success of  UTI mutual fund. The company has been facilitating the best customer relation for a long time now.
UTI mutual fund covers a wide geographical area in terms of having a strong network of branches spread across the country. The company follows an international approach with a combination of extending government security for each and every scheme. Thus, the clients have a secured yet international flavor of investments. Having a huge network of branches, numerous employees, and crores to manage, UTI mutual fund makes sure to maintain a proper code of conduct for its staff as well as clients. The welfare of the investors is the epicenter of dealings instead of earning profits only.

Adapting to technological changes UTI mutual funds has initiated the online investment strategy for providing an increased comfort to its clients. UTI is a trusted brand in the country. Being a government undertaking UTI mutual fund has a reach of even the remote villages of the country. Initiated with a perspective of making the people aware of the miracles their money can do if invested in the right place. UTI Mutual Fund is the company which taught people the difference between saving and investing. However, it has suffered a few shocks. But the management of UTI mutual fund has been successful in removing all the loopholes from the system.

So, invest in UTI mutual fund and enjoy the growth of your funds.

SIP - A Ladder Towards Dream

There are two methods by which one can invest in mutual fund. First is lump sum through this method the client can invest an enormous amount at one time. Second is Systematic Investment Plan (SIP). In this one invests a fixed amount at regular intervals.

SIP Investment Plan is an investment methodology presented by mutual funds to its investors. By SIP one can invest a fixed amount in mutual fund bit-by-bit on monthly or quarterly basis for a period of time. It gives the privilege of compounding to the investors. Power of compounding is shown in better way when the amount is invested for a long duration. Whenever fresh sum is invested in SIP more units are combined in investor’s account. It presents the advantage of rupee cost averaging.

Rupee - Cost Averaging

Predicting the ups and downs of the market is a challenging task. Once the client invests in SIP he can be free from this game. It is the best way when one opts it for a long run. A unit in mutual fund is just like the shares of a company. It represents the degree of ownership in mutual fund. An investor will get more units when the prices are low and less units when the prices are high. It simply means that investor will average his/her profits over a long spell of time.

Power of Compounding

Albert Einstein quotes,“ Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t, pays it.” For gaining maximum output from SIP you have to start as soon as possible, maintain continuity of your investments and be patient. Because even a small seed takes time to grow and give fruits.

Systematic Investment plan vs Recurring Deposit

Structure
RD is a method of regular saving provided by banks and post office. The duration of RD period can vary in between 6 months to 10 years. It is like fixed deposit account but for the monthly investment. Unlike, RD the investor invests money in periodic intervals instead of a single lump sum payment. By doing this the investor will get the units of mutual fund depending upon the Net Asset Value. Whenever the NAV gets changed the clients will receive different units accordingly.

Risk Involved
RD is a secured investment method because the amount is deposited in banks.
On the other hand, SIP invests in equity or debt fund so little bit risk is involved but for long term it provides adequate safety with high return.

Return
RD is a saving hence in return person will get only his saved amount plus interest. In an SIP the amount is invested in mutual funds and the return will depend upon the asset allocation.

Why one should go for SIP

• A lot of people start investing with great interest and are discouraged after some time. A systematic investment plan helps them to save on regular basis. So, it encourages discipline in investment.
• No extra burden on wallet. 
• Your investment get the returns from the first day.
• SIP can be weekly, monthly or quarterly depending on investor’s preference.

An SIP plan gives a number of schemes that makes an investor comfortable and presents a good experience of investing. It is a very fruitful method of investing even for the small investor without any difficulty. 

Smart investors segregating the difference between savings and investing

Have you ever given it a thought that your hard-earned money is capable of showing impeccable returns if invested in the right places? It can even make you a millionaire if you follow the concept regular and planned investment. Don’t be shocked! It is true you can achieve greater returns as compared to the initial investments you did. The clients are able to earn higher profits within a stipulated time period. Many clients aspire for a lot of things like big house, luxury car or a long holiday at an exotic destination. But, these involve a lot of money and a lot of these desires remain unfulfilled due to the insufficiency of funds. If a person plans for such requirements at an early age, then he/she will be able to achieve what they aspire.

Mutual funds have proved to be an innovative solution for the people to make maximum profit with minimized risk. A number of small investors conglomerate their funds in order to earn the best possible returns for their hard-earned money. Mutual Fund proves to be an eye-catcher for the investors who are seeking safety and splendid refunds. Following the phrase, “Individually we are a drop, together we are an Ocean”, Mutual fund’s epicenter lies in achieving the success by integrating. The predominant aim of the mutual fund companies is to pool the money of the investors who are having common investment objective and make use of that accumulated wealth in a proper manner to reciprocate maximum returns.

If you intend to invest in mutual funds, then there are a few steps which would help you to take better investing decisions. They are:

Analyze your requirements

A person has certain goals in his/her life. These may be related to career, family, status, possessions, etc. To earn a place for yourself in life, you need to set an aim. Until and unless there is a target in a person’s life he/she will not be motivated to work towards achieving it. In the same way, if a person wants to invest in mutual funds there should be a target. The client first needs to understand the target of investment like, retirement, child’s future, buying property, etc.

Pick Up the Right AMC, 

With the growing opportunities in the mutual fund industry, the companies providing the facility is also growing. The mutual fund providing firms are popularly known as Asset Management Companies (abbreviated as AMC) like Birla Sunlife MF, TATA Mutual Fund Etc. To select an AMC which has an ethical functioning and is fair in dealings is a tough task. It requires a lot of research before one can spot a company to place their money with. It is an important decision which will determine the growth of your money and the safety of your investments. The clients will have to be extra cautious as not to involve with any company which has a bad track record. Thus, make a good choice and have a happy investing experience.

Let the money workout instead of resting in bank

A saving bank account is one of the many financial essentials. Nowadays, every single monetary transaction is carried out through the bank like, online transfer of funds, auto-debiting EMI, online shopping, etc. But, people often confuse saving in the bank accounts with investing. The money in your account will earn a mere 4% rate of interest that is calculated through simple interest. Why to just stack your money when it can do miracles with mutual fund investing.

People take up bank deposits as their method of storing money because they consider it to be secure and liquid. By liquid, it means that the cash can be withdrawn from the account at any time. Often mutual fund is associated with long-term capital gains. But, what about the investors who have short-term investment perspective? Will they have to restrict themselves to savings? The answer is no. A mutual fund is called a one-stop destination for all your investing needs. Hence, not a single client’s desires are ignored, whether it may be a long-term investor or a short term. Mutual fund experts have come up with an innovative idea of short-term investments that are equivalent to cash in hand and the same time facilitate money multiplication. The scheme is called liquid mutual fund. The name has been selected owing to its capability of any time withdrawal.

The best liquid funds have been launched with a view to providing an opening for the investors who have unused surplus amount for a short period. For example, Amit, an IT professional, has extra money worth Rs. 50,000. He ought to purchase a bike with it. The market analysts speculate a fall in the prices of bikes within coming three months. Thus, for the span Amit wants to invest money as the cash in hand would attract him to spend. On his friend’s advice, he invested in one of the best liquid funds after thorough research. The investment earned him a return of 8% which facilitated the growth of his money. He was able to save and invest at the same time given the short span.

Liquid funds always show a trending graph. The statement implies that liquid funds remain unaffected by the market fluctuations. They always trend upwards even if the market goes down. The reason is the short spell and the investment mechanism it follows. The investment is realized in money market instruments like the certificate of deposit, treasury bills, etc. These instruments have a maturity period of 91 days.

One can observe that the element of equity investment is absent from liquid funds which makes the scheme much more secure. The clients can easily redeem their liquid fund holdings. A request has to place for redemption on any of the working days before the stipulated time, i.e., 2 p.m. The request will be processed, and the amount will be credited to your account by the next morning. Liquid funds also provide you with the facility of altering your withdrawal amount. For example, a client has deposited Rs. 60,000 in one of the top liquid fund plans for three months. But, after one month he requires withdrawing Rs. 20,000. He is permitted to do so and let the remaining Rs. 40,000 be invested in the same scheme to enjoy the benefits.

Catering to the needs of the short-term investment, liquid funds do not have any exit load. The exit load signifies the penalty or the fees that are charged on before maturity withdrawal of your invested amount. The clients are free to redeem the investment at any point of time.

As compared to the opponent (bank deposit), liquid funds are gaining momentum among Indian investors. The clients are happy with investing rather than simply saving. Liquid funds have certain types viz, growth and dividend. The customers who opt for the growth scheme receive a lump sum amount including the growth value at the maturity of the plan. But, bonus plan will supply the clients with a regular income from the profit during the tenure of investment.

Thus, liquid funds like Kotak Mutual Fund Treasury Advantage Fund and Reliance Money Manager Fund can be the most convenient avenues for the investors to deploy their riches for a short period and earn prolific returns.

Stashing of money made easy via mutual fund investing

Mohan is a dedicated employee and pocketed a handsome salary. His primary concern is to secure a good sum for his post-retirement life. But, his concern is the difficulty in locating a suitable scheme. He knows that with PPF money can be saved, but the growth was not up to the mark. And with the recent cut off in the rate of interest has raised the worries of the account holders. With the soaring volatility in the stock market, Mohan strikes out the option. Now, he is searching for avenues which can accommodate his money and facilitate growth as well.

Perceiving the problems of Mohan and many such investors financial experts have come up with a facile technique which would release the traction of clients. The scheme is called mutual fund. Evident from its name, a mutual fund is a technique through which the clients will be able to bank enormous profits through combined investment. The concept may sound a bit confusing to you but is quite straight and simple. We all have enjoyed the golden period of school and college. We all have also experienced a situation where we had to manage our expenses within the limited pocket money. Hence, if an outing was planned everyone contributed their share and with the total amount the party was organized. In the same way, a mutual fund is a scheme that accumulates the money of numerous investors having identical investment needs. The money thus accumulated is reinvested in the stock exchange.

Mutual Fund against Stock Market

Clients often get muddled up between mutual funds and stock market investing. Even though the mutual funds invest in the stock market but it is not the only avenue available. It invests in various other instruments as well. Thus, one cannot state mutual fund as a capital appreciation tool only. The following points will clarify the broad difference between these two:
Stock market investments include buying and selling of shares of listed companies while mutual funds include schemes for tax saving, fixed income, etc. along with capital appreciation. Hence, the area of operation under mutual fund is not restricted to one field. It can be termed as a multi-utility investment plan.

In the stock market, an investor is personally liable for the investments he does. But, the situation differs in mutual funds. A person liability is up to the amount he/she invests. There is no personal obligation on the clients.

Stock market investing is a personalized matter. Each and every step is to be followed by an investor alone. There are advisors but still the major responsibility is of the investing party. But, in mutual fund investing the client needs to select a suitable AMC (Asset Management Company) and the rest will be taken care off by the fund managers of the company. Monitoring is thus required but to a limited extent. All the work is done by fund managers on behalf of the clients.

Mutual fund investment allow the clients to avail any of the available two investing methodologies viz, Systematic Investment Plan (SIP) and lump sum. The clients who cannot or don’t want to carry out one-time investment can surely use SIP to invest little by little at regular time intervals. This facility is absent in stock investment. The investors have to put in a large amount at the same time when it comes to stock exchange.

Even though mutual funds invest in the stock market, they are very much less volatile as compared to the shares. The simple reason is the diversification factor that is possible in mutual funds on a colossal scale owing to the pooling of riches. The stock market also provides diversification, but it is impossible for a single investor to put his money in numerous companies at once.
The return potential of equity is no doubt high, but the risk factor plays a crucial part here. The return perspective of shares is a see-saw between loss and profit adhering to the fluctuating market scenario. However, the gains on mutual funds also vary but then too the equity-oriented funds are capable of providing an average return of 15%.

As compared to any other form of saving and investing, mutual fund is serving as the cushion against fluctuating market scenarios. Along with the security, mutual funds no doubt provides stipulated returns over a longer duration.