It is very important to know some things before starting SIP. From where will you do SIP? Who takes care of your money? How does your money grow? We will try to understand all these things step by step.
fund house
To start a SIP, you have to choose a fund house. There are many fund houses. You can start SIP from any fund house. SIP is also done from mutual fund distributors. It is considered good to do SIP from fund house. The fund house employs the services of a fund manager. Investing in mutual funds is done through SIP. You can also buy mutual funds directly. But SIP is considered best to build a big corpus in the long run by collecting a little money.
Where to get SIP
You can take a SIP plan from your bank. You have to meet your bank manager and fill a firm for SIP opening. Then after a few days your SIP money will start deducting from your account. SIP facility is available in almost all the banks. You have to fix a date and every month on that fixed date your money will be deducted from your account and your investment in SIP will continue.
Online SIP
You can open SIP online. You have to go to the direct plan of any mutual fund from your laptop. There you will have to do online KYC by uploading Aadhar card and PAN card. Auto debit of whichever account you want to pay the money from will have to be selected. Your money will be deducted after 30 days and SIP will be activated. Online SIP is for 99 years. You can opt out of this scheme at any time.
fund manager
Fund managers are very professional and experts. They are responsible for investing and managing your money. They have a team of expert people. It is their job to take this decision, in which fund to put your money? When to withdraw money It is the responsibility of a good fund manager to financially manage your money in such a way that there is continuous growth. By the way, mutual funds are market based plans. It is directly affected by the fluctuations of the market. Nevertheless, the management role of a professional and expert fund manager has a very direct impact on the fund's growth.
what is NAV
NAV is called Net Asset Value. The value (NAV) of the money you invest in SIP is allotted as Net Asset Value. You can start a SIP with a minimum of Rs 500. The maximum can be anything.
what is the unit
When you invest in mutual funds, units are allotted to you from the money invested by you. How many units of your money you will get, it (NAV) is decided on the basis of Net Asset Value. Suppose you do a SIP of Rs 2000 in a mutual fund. If the NAV value of that fund is Rs.10, then you will get 2000÷10=200 units. Similarly, every time you invest money will be allotted in the form of units.
where to invest
There are many types of mutual funds in India. If we try to know about all types of mutual funds, then a situation of disorientation will arise. Equity mutual funds are considered good from investment point of view. Equity mutual funds through SIP give good results in long term investment. There are mainly four types of equity mutual funds.
1. Small Cap Funds- These funds invest their money in small sized companies. Small sized companies are listed in large numbers on the stock exchanges. Their market capitalization is less than Rs 5,000 crore. The investment risk in these companies is very high.
2. Mid Cap Funds- These funds invest their money in medium sized companies. Their market capitalization is more than Rs 5,000 crore and less than Rs 20,000 crore. The risk invested in these companies is less than that of small cap companies and higher than that of large cap companies.
3. Large Cap Funds- These funds invest their money in large cap companies. There are a lot of big companies in this category. Their market capitalization is 20,000 crores or more. The risk of investing in such companies is low. These companies already have a hold in the market.
4. Multi Cap Fund-- This fund invests its money in all three large cap, mid cap and small cap. Due to this the investment risk remains low.
After knowing this, now it is important to know what is the investment cost and portfolio value?
Investment cost- When the money we deposit every month as SIP. That money is called investment cost. Suppose you run a SIP of Rs 2000 per month. You have deposited Rs 2,40,000 in the journey up to 10 years. This Rs 2,40,000 is called the investment cost. This money is deposited by you.
Portfolio Value- The units are bought with the money you run the SIP. The units purchased every month get accumulated in your portfolio. The result obtained by multiplying the units of your portfolio by the NAV at present is called the portfolio value. Suppose you have accumulated 20,000 units in your portfolio during the 10-year SIP journey. At present, if the NAV is Rs 40, then the portfolio value is 20,000 × 40 = Rs 800000.
Investment cost of Rs 2 lakh 40 thousand and portfolio value of Rs 8 lakh.
By now you must have understood many nuances of SIP. It is considered good to do SIP in equity mutual funds to make a big corpus with less money. For this, SIP should be run for long term. Or say that for the purpose for which you are running SIP, you should keep running the SIP till the completion of that purpose.
(This post has been written for information only. You should make any investment only after consulting your financial advisor.)
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