SIP For Beginners Could be a game changer

SIP for beginners in Mutual Fund investment could be a game changer. It is always been popular among those who are interested to get higher return and ready to take higher risk. Long term investor preferred higher return for some particular goal of their big budget. Such as marriage, tour for dream destination, children education plan and retirement plan.

SIP for beginners help to invest mutual fund for many reason. They can choose from various plans and start investing with as low as 500per month also. The long term investors can select SIP with small amount for long term. SIP for beginners work as cushion against market ups and downs through the tenure of investment.

SIP For Beginners, Advantages Are :

• Can be start with only Rs 500

• Easy Installment scheme like monthly SIP

• Also available lumpsum investment with diversified portfolio

• Also available balance fund for balancing risk factors in investment

• Debt Funds for stable returns or fixed monthly returns

• Targeted Funds like Education or retirement Funds
• Also available tax savings ELSS Funds that helps a long time capital gain.

What is Mutual Fund and How does it works ?

Asset Management company or AMC pools money from investors in the markets and allot these money to stock market listed companies, Bonds, Gov. securities and other money markets. According to different fund allocation mutual funds distributed in different sectors in stock market. If most of the funds are invested in equity so that funds called as Equity Mutual Funds, where most of the fund are allocated in large cap stocks are called Large Cap Equity Funds and most of the funds are invested in the small stocks are called as Small Cap Equity Funds. Collected funds from different investors makes a big corpus, that is known as total AUM or capital of that AMC. This corpus are distributed in different money markets like shares, bonds, government bonds and securities, short term money markets and also debt fund or combinations of those markets. Mutual funds are classified according to its asset allocation sectors. Also combination of debt funds and equity funds are called Balanced Advantage Funds. Balance funds are crafted to reduce risk of equity markets, to balance with debt fund’s stable returns. Similarly when equity funds co related with risks of market’s ups and downs, there debt funds are responsible for risk free stable returns. Type of mutual funds and it’s objectives are disclosed in the offer document of that particular Mutual Funds.

How To Invest In Mutual Funds In SIP For Beginners

Investment in Mutual Funds are not so easy, because of different objective and different funds. Its most your perspective matters. You should be confident about your perspective of investment. How long you can continue and how specific your judgement for a particular fund to get the most benefit from it, is the most important factor. If you are just starting then your age will decide your perspective. if you are around 30 yrs of age, you can choose growth funds in Equity Mutual Funds for higher return, because you can play with higher risk for long time at this age. but if you are on 50+ age you should go for stable or fixed return for retirement period. Time is the most effective condition in Mutual Fund Investment.

If you are a beginner follow some important steps to start your investment.

• Choose The Right Funds : According to your age, set a goal and time period. If you are around 30 yrs of age go for 10 yrs to 20 yrs investment plan, diversified your port folio with 50% of growth and 50% in Balanced Advantage Funds for better return. If you are 40+yrs then go for 30% of growth and 50%Balanced Fund and 20% of Debt Fund for moderate return. After 45yrs of age advisable for moderate risk and go for 10 to 20yrs of investment, 50% of Balanced and 25% in growth and rest in Debt. after 60yrs go for stable income in Debt 80% and 20% could be in Balanced for better return.
• Go For the Fix Your Goal : Go to fix your target for what purpose you need the big money to fulfill your goal. It can be your dream vacation or buy a car, or higher study for children or new business and retirement.
• Go For SIP Instead Of Lumpsum Investment : SIP investment is more beneficial for better return, because of maintain a lower average cost. It means, you invest 1000 per month for 5yrs, 1st month your NAV Rs 10 and you get 100 units. 2nd month NAV get down to Rs 8 and you get your units 20% higher because of lower rates 125 units. in 3rd month NAV you get Rs 6 and your unit 167. In 4th month you get again Rs 8 and in 5th month NAV become 10 again. So the scenario is :

Month	NAV (in Rupee)	Units
1.	10.00	100
2.	8.00	125
3.	6.00	167
4.	8.00	125
5.	10.00	100

Total Average cost (10+8+6+8+10) or (42/5) or Rs 8.2, Total Units 617

And Value of investment on 5th month (617*10)= 6170

Here what we found you invest Rs 1000 for 5 month, Total Rs 5000, your average of buying units 8.2. On fifth month when NAV again Rs 10.00 your investment value became Rs 6170, that is profit of 1170 in spite of ups and down of NAV value, because of SIP your buying average become Rs 8.2 and after down when NAV again up you get profit. This is the theory SIP works. For long time investment SIP provide cushion for down side risk in the market and investor reap benefit the most.

That’s the way SIP for beginners works most effectively. So, if you are a beginner go for SIP investment to get most of it.

Frequently Asked Questions And Answers :

Ques : 1) Which is better FD or SIP ?

Ans : For beginner SIP is better. FD has a fixed return but SIP offers market returns. When market is lower you can get an opportunity to average your investment through SIP and when market goes up your return will be much higher than before.

Ques : 2) How much amount should be started for a good return in SIP ?

Ans : According to your capability to continue a SIP investment for long you should start the amount. But it should be higher, because if you start investment at your young age that could be most benefited at the long term SIP investment in Mutual Fund.

Ques : 3) Can you loose money in SIP ?

Ans : You can not loose money in SIP if you continue to invest when market down. Because in down market you average your cost of investment through continue SIP and get much higher return when market goes up and higher.

Ques : 4) Is SIP tax free ?

Ans : SIP investment is tax free when you invest in ELSS Mutual Funds and also get higher return. It has 3 years lock in period and 100% tax free under Sec 80C income tax savings Act 1961.

Ques : 5 ) Is SIP better than Lumpsum ?

Ans : Yes, SIP is better than Lumpsum investment in market. Because of rupee cost averaging of your investment through SIP. It means when market goes down you can average your cost of unit from lower and when market goes up it covers losses fast and get higher return. Because Mutual Fund investment is subject to market risk.