Investment Plans And Services In Mutual Fund.and Other services Available Under Mutual Funds
By: Nandhalal Vs
Tags: Money Management, Mutual Funds, Mutual Funds India, Mutual Fund Investment, Mutual Aid

Systematic Investment Plan or(SIP).

A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.

How does it work?

A SIP is a flexible and easy investment plan. Your money is auto-debited from account and invested into a specific mutual fund scheme. You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day. Every time your bank invest additional units of the scheme are purchased at the market rate and money, you added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding

Features of a Systematic Investment Plans



A fixed amount is invested regularly, at periodic intervals.

Promotes disciplined saving in regular phases.

Amount can be transferred through Post-Dated Cheques (PDCS), ECS or even via direct debit from the investor’s salary or bank account.

Investors get the benefit of Rupee Cost Averaging.

Investors are not forced to make all their investments when the market is at its highest.

Systematic Withdrawal Plan or (SWP).

In this option, investor can withdraw a fix amount, regularly out of own investments. MF makes it convenient for investors to manage their SWPs by indicating the amount and periodicity. SWPs minimise the risk of repurchasing all the units during volatile market. It ensures liquidity needs for regular expenses. It also ensures regular profit booking during upward market. In this option, it would be more tax- efficient to take money out of the scheme as a re-purchase as compared to dividend payout.

Features of systematic withdrawal plans



Reduces the risk of redeeming all the units at the time of a market trough.

Liquid enough to satisfy regular expenditures.

Systematic withdrawals are made at periodic intervals.

Withdrawals are made from the fund’s investmentaccounts.

Amount withdrawn is treated as redemption of units at the applicable NAVS.

Investors are provided with the amount, periodicity (normally monthly) and period of their plan.

Certain schemes allow only the appreciation or the dividend to be transferred.

No dividend tax is charged.

Debt schemes are subject to Income Distribution Tax.

Systematic Transfer Plan or (STP).

In this option amount transfer from one scheme to another type of scheme regularly. The amount that is withdrawn from a scheme is re-invested in some other scheme of the same mutual fund. Thus, it operates as a SWP from the first scheme, and a SIP into the second scheme. This is a best tool for asset diversification. Systematic transfer plan are allows the investor to switch between investment options without withdrawing any money. this makes it quite safe and also results in quite decent return.