SIP FAQs
Q: Is a systematic investment plan safe?
A: Yes, a systematic investment plan is a very safe way of investing in mutual funds. It helps one invest in the scheme with regular investments and saves from a single lump sum investment which might result in paying more due to overvaluation of the fund based on market conditions.
Q: How to open a systematic investment plan account?
A: For starting a SIP, one needs to have a clear goal, after which the person has to complete the KYC process and select a mutual fund scheme that is in line with their goals and choose the SIP option best suited.
Q: Do I need a Demat account to start SIP?
A: Although SEBI has mandated the need to have a Demat account to invest in the stock market, it is not compulsory to have a Demat account to start a SIP. The modernization in technology has eliminated the need to have a Demat account for the investment in mutual funds.
Q: Which systematic investment plan is best?
A: Various criteria help one decide which SIP is best, such as the rating of the mutual fund, historical returns, expense ratio, exit load, the investment process, etc.
Q: What is the difference between a systematic investment plan and a lump sum investment?
A: A systematic investment plan allows one to invest in the mutual fund scheme periodically like monthly, quarterly, semi-annually, or annually. However, in lump sum investment, the bulk of the whole investment is made in one go.
Q: What is the difference between a systematic investment plan and a fixed deposit?
A: SIP is a mode of investment in a mutual fund with the option of regular deposits into the scheme. On the other hand, FD is a way of investment where people deposit a certain amount for a specified period and earn interest on the same.
Q: How to stop SIP?
A: To stop the SIP, the investor has to log in to their mutual fund website with their credentials, then select the SIP they wish to discontinue. The deductions stop after the waiting period, the funds stay invested in the fund until a redemption request is made.
Q: How to redeem SIP?
For redemption of SIP, one can use the online portal of their fund house, where they can sell a part or whole of the units of their investment. Once the request is processed, the redemption amount gets transferred through NEFT or cheque.