FAQs

Systematic Investment Plan is not a unique approach in deploying savings. It is similar to a regular savings scheme like a recurring deposit with a bank where we can put small amounts at periodic intervals. Investing in a mutual fund through SIP allows participation in the equity markets systematically.

One-time investment is better only when there is a high degree of certainty that the market is going to go through a rising trend. Markets are volatile and predicting is very difficult; timing works only when exit and entry are in an investor's favor. If an investor invests a bulk amount on a day and the market declines, the investor may panic and withdraw the amount leading to a sizeable loss. Also for most investors, one-time investment may not be feasible due to a lack of resources. In the case of systematic investment, it is not necessary for the investor to accumulate a huge amount at one go before making an investment. He can accumulate small amounts and invest regularly. SIP also enables investors to start investing in equity early.

Power of compounding, rupee cost averaging and the option of investing small amounts regularly.

When investing through SIP it is not necessary to time the market. Investments will be made systematically every month or quarter depending on the option. Since the investment amount will be uniform, units accumulated during a bearish market, will be more compared to the units in a bullish market. Thus the investor enjoys the benefit of rupee cost averaging under this method.

Investments are generally postponed. However, longer you leave the money invested, the faster it will grow. The investment starts to earn returns and these returns again start to earn money. Compounding being the tool that generally makes a small sum grow to large amount.

Compounding is the fact that the money you make off an investment can be reinvested to make even more money than your initial investment. The money you make goes back to work to make you even more money than before.

Sounds confusing? It's actually pretty simple.

Say you've invested Rs.10,000 and it makes 10% interest per year. In the first year, you make Rs.1, 000 in interest. But in the second year, you'll make Rs.1,100 (not only does your initial investment of Rs.10,000 accrue interest but so does the additional Rs.1,000 you made in the first year). In the tenth year, you'll make Rs. 2,358. And in the 30th year you'll make Rs.15, 864. That's all without making another investment beyond your initial Rs.10,000. In 30 years, the power of compounding gets you from making Rs.1,000 per year to making Rs.15, 864 per year.

One main benefit of investing through the SIP route is rupee cost averaging. When investment is done at regular intervals, units will accumulate at different market levels. When an equal sum is invested every month, the amount will get averaged based on the different NAV's.

The average rate at which the investment is made is at Rs 14. Hence units get accumulated at different market levels.

If the NAV during the end September is Rs 17, the value of Rs 2000 investment will be worth Rs 2448. If a person had considered bulk investing and invests Rs 2000 on August 7, the investment will be worth only Rs 226.

The right time to start the SIP is now. The longer the SIP period, greater is the average annual returns. More over the percentage of positive and negative returns will decline considerably as the SIP tenure will cover all phases of the market. Even if the SIP is chosen for a shorter period, it is always advisable to renew it, once the tenure is over.

Investment through the SIP route can be done only in the case of equity and fixed income funds. For liquid funds only bulk investment is possible.

With the exception of ELSS (Equity Linked Savings Scheme) funds or tax-saving funds, which have a lock-in period of three years, investment in other funds can be redeemed before the tenure. All SIP installments in ELSS funds have a three year lock-in period.

Redemption of the amount during the SIP period will not amount to stop of SIP. SIP will continue unless the investor specifically requests to stop the SIP by means of a written and duly signed request.

Entry load on funds will differ from fund house to fund house. If there is entry load, then the same will be applicable for each SIP transaction. There will be no entry load for direct applications received by the asset management company or collection centers/investor service centers that are not routed through any distributor/agent/broker.

No entry and exit load will be applicable on dividend reinvestment and for bonus units.

There are specific dates for investment 1, 7, 14, 20, & 25. Investor can opt only any one of the dates for investment. In this case, every month during the SIP tenure, the investor will be allotted units based on the NAV on that particular date. In case it is a holiday, units will be allotted on the next working day.

SIP monthly installments for the tenure and the first cheque need not necessarily be for the same amount.

Switch from one fund to another can be done by giving a switch request and clearly indicating the SIP instructions. If it is clear, the switch will be activated and the investment will be made according to the instructions, else, the SIP will continue in the old scheme. In case of SIP through Post Dated Cheques (PDCs), a new application and fresh cheques in favour of the new scheme have to be submitted. The old PDCs would be returned to the investor.

Units allotted will be equal to (Amount invested / Applicable NAV). The Applicable NAV is the NAV on the day, when the investment will be made. Thus, the units allotted will differ depending on the applicable NAV during different months.

If the SIP date during a particular month is a holiday, units will be allotted at the applicable NAV on the subsequent working day

If in the application form the investor has opted for Dividend Reinvestment, the dividend amount will be directly invested in the fund and units will get accumulated to the investor. If the investor opts for Dividend Payout, the dividend amount will either be credited in the account of the investor or will be sent as cheques depending on the option chosen.

While applying for purchase of units, the POA holder needs to submit the original POA (Power of Attorney) or a duly notarized copy. The Power of attorney should contain the signature of both the first holder and the POA holder. Only when the POA is registered does the POA holder have the right to transact on behalf of the NRI/FII investor. His signature will be verified for processing any transaction/request.

Pursuant to RBI guidelines on Electronic Clearing Service (ECS), the process stated below shall be followed for ECS (and post-dated cheque) rejections pertaining to investments in the schemes through Systematic Investment Plan (SIP):

a. If the rejection of ECS is for the reason "account closed", no re-presentation shall be made and this will lead to closure of SIP.

b. If the rejection of ECS is for the reason "insufficient funds", only one subsequent representation shall be made. Rejection of the subsequent representation will lead to closure of SIP.

c. If the rejection of ECS is for any other reason, only two subsequent re-presentations shall be made. Rejection of the two subsequent re-presentations will lead to closure of SIP.

We will send a transaction confirmation through email/SMS provided you have registered your email address and mobile number with us.

Yes, you will get an "SIP due" alert five days before the next SIP date, provided you have registered your email address and mobile number with us. The investor would also be getting an email/SMS alert for SIP renewal, on a T minus 7 day basis, where T is the last SIP transaction date.

SIP is always favorable than lump sum investment as different units are allotted at different market levels. The investor is not required to accumulate a huge sum at one go, but can invest periodically a small amount and accumulate in a phased manner. When the market is very volatile different units are allotted at different phases.

On Behalf of the Minor, the investment is made through the Guardian. Based on receipt of attested copy of birth certificate of the minor, his PAN card copy, the KYC (Know Your Client) confirmation / acknowledgement letter the banker's (of the bank registered in our records/going to be registered in our records) attestation of his signature and bank details, along with a covering letter duly signed by both minor and guardian for change in status, the status could be changed from On Behalf of Minor to Individual.

By using the SIP Top-Up feature, you can increase your contribution in an SIP at pre-determined intervals by a fixed amount during the tenure of SIP.

• Add to your Savings: As personal income increases, you can add to your investments through SIP by opting to top-up your investments by a fixed amount at pre-determined intervals.
• Ease of business:This unique service offering also helps avoid the paper work associated with increasing your SIP contribution during the SIP tenure.
• Ease of Maintenance:The Top-Up feature reducing the necessity for creating and tracking multiple SIPs in the same Scheme.

Please find an illustration of how the Top-Up feature operates.

The idea of SIP is to avoid timing the market and should be started at any given state of the market. Be it very high or very low. The purpose of SIP is to avoid timing the markets and get into the habit of investing with a purpose.

Mutual funds are not categorized to be accepting any particular type of investment like SIP or lump sum investments. All mutual funds accept both the option of investment i.e. you can start a SIP or do a lump sum investment or even both at the same time. So if you want to be doing a SIP of 1k and a lump sum investment of 10k, you can do it in the same fund on the same day. If you have an ongoing SIP in any fund and want to be adding some more amount as lump sum amount, you can do that. If you have an existing SIP and want to be doing a second SIP in the same fund, you can do that too.

The short answer is nothing. Many investors tend to think that if a SIP is missed for any reason, the SIP account will be de-activated or they will have a bad CIBIL score for missing a SIP in mutual funds. Even if you miss a SIP due to insufficient balance in your bank account, it will neither have any impact on your CIBIL score nor on your SIP. You can just miss the SIP and it will be all ok when the time for next SIP comes, your SIP will continue as normal.

It also means that if you want to be starting SIP, you don’t need to think too much about future payments. You can just SIP for some months and if there is some financial crisis for you, you are fine missing few SIP’s and then continue once you have the needed funds.

No. There is a misconception about SIP that it is for smaller investment amount but that is not the case. There is no upper limit to the SIP amount and you can SIP for as much investment amount as you want.

At the end of your SIP completion, AMC’s sends renewal form, which can be filled up and send it back, to extend your SIP investment. If you don’t want to be waiting for the completion of your SIP then you can just fill the SIP form with your existing folio number, and the new time period and send the form to extend the SIP period.

If you have online access to SIP, you can cancel the SIP with just few clicks but if you don’t have online access, you need to either send in a written and signed application to the AMC few days (Varies for different fund houses) before your next SIP date. Just remember that you can stop a SIP only if you have completed minimum investment period, which is 6 months for most of the funds. To avoid shortening of duration of SIP is to start a SIP for 6 months to a year and then add more time as you judge the performance.

Every invested penny in a tax saving mutual fund (or any other locking period) needs to complete 3 years (locked in period) to be eligible for redemption. The easiest way is to consider each SIP as a one-time investment at a regular interval. So, each SIP in an ELSS fund will be locked in period for 3 years from date of purchase.

• If you started your SIP today i.e. 11th May 2014 with a locking period of 3 years then you can only withdraw that many units that you purchased with your first investment on 11th May 2017.
• The units allocated with second SIP investment on 11th June 2014 will be available for withdrawal on 11th June 2014 and so on and so forth.

The calculation for exit load is exactly the same that I have explained for the locking period in the above question. Fund houses uses FIFO or first in first out method for calculating the exit load.

If you started a SIP on 1st October 2013 for 6 months and your SIP ended in March 2014 and assuming you don’t have any locking period. If you plan to redeem your investment on May 11th 2014 then, any units allocated before November 11th 2013 (6 months from now assuming 6 months is the time period for no exit load) will not have any exit load but units purchased between December to March will incur exit load.

If you plan to redeem only part of your investment in May 2014, then units purchased first will be redeemed first. So units purchased on 1st October and 1st November will be redeemed first. If your redemption request is for units lower than those purchased in October and November, you will have no exit load but if you redeem more units than what is purchased in October and November, you may incur exit loads on rest of the excessive units redeemed.