SIP Investment - Why Should You Increase Your SIP Every Year

SIP Investment - Why Should You Increase Your SIP Every Year

Whenever people begin their investment journey, they secretly wish to become millionaires, almost overnight. However, to effectively create wealth you need years of consistent investing at a gradual pace. Investments need time and also a boost from time to time to grow. Mutual funds are an effective investment tool to build a corpus. When it comes to investing in mutual funds, Systematic Investment Plans (SIPs) are a convenient option.

In this article, we look at SIP investments and how increasing your online SIP investment every year can be beneficial to you.

What Are SIP Investments?

Many investors think of SIPs and mutual fund schemes as synonyms, however, that is not the case. SIPs are merely tools that allow you to invest in a mutual fund scheme over a period of time. It can be monthly, quarterly or semi-annually depending on your financial goals. It acts as a convenient option for salaried individuals to regularly invest in mutual funds. The money can get deducted from their account automatically thereby engraining a financial discipline.

Most mutual fund managers advise investing through SIP investment plans rather than lumpsum investments. This is because SIPs help you to average your purchase cost and maximise returns. Since you invest regularly over a period irrespective of how the market conditions are, you automatically end up buying fewer units when the market is high and vice versa. This helps to average out the purchase cost of your mutual fund units.

How To Start SIP Investment?

You can start an SIP with a minimum amount of Rs. 500. Here is how to start SIP investment if you wish to buy mutual funds.

• Basic Information
The first step of SIP investment requires you to provide all your basic personal information in an online form such as your name, date of birth, address, mobile number, etc.

• Upload Documents
In the next step, you are required to upload a scanned copy of your PAN card and address proof.

• Video Call
Next, you are required to complete the IPV or In-Person Verification by selecting a time slot which is convenient for you. This requires confirming your physical existence through a webcam video call. It is advised to keep your address proof and original PAN card handy as you will be asked to show it during the video call.

• Aadhar Based eKYC
The above procedure for SIP investment can be simplified if you have an Aadhar card. You have to enter your Aadhar number and authenticate it with a One-Time Password (OTP). This will pre-populate the online form with all your basic information details available in the UIDAI database.

IPV through a video call is not required if you complete the eKYC procedure through Aadhar as the UIDAI database already has your biometric information. However, there is a statutory limit which will not allow you to invest more than Rs. 50,000 per fund house in a financial year if PAN card details are not submitted by you. You can submit your PAN card and enhance this limit.

• The Final Step
Lastly, visit the website of IndiaNivesh Ltd. and register for a new account. Keep your phone and cheque book near you as you would be required to verify your account through OTP and enter your bank details. Once the account is created, you can log in and choose the mutual fund scheme you are interested in. Choose the SIP date and submit your request.

Benefits of Increasing Your Online SIP Investment Every Year

Here are some advantages of increasing your SIP every year.

• Builds A Bigger Corpus
When your income and surplus increase every year, it makes sense to increase your SIP investment too. It adds to the power of compounding and helps accumulate greater wealth by building a bigger corpus. Even a small 5% to 20% increase in the SIP investment plan at the end of 10, 15 or 20 years can make a big difference. In addition, you can avoid increased documentation as it will reduce the necessity of creating and tracking multiple stocks.

• Counters Inflation
While investing, the return adjusted for inflation is a significant factor to be considered. As inflation increases every year, the amount you find substantial today may not have the same worth some years down the line. Hence, if you do not increase your SIP investment amount every year, you ignore inflation which erodes the purchasing power of your hard-earned money.

• Achieve Your Financial Goals Faster
Suppose you start a SIP investment plan of Rs. 5,000 per month. Assume an annual return rate of 12%. After 10 years, your corpus would grow to be Rs. 11.6 lakhs. However, if you decided to increase your SIP contributions by 10% every year, after 10 years your corpus would grow to be Rs. 16.8 lakhs. That is a difference of over Rs. 5 lakhs. As the years multiply, the difference would be a lot more.

How To Increase Your Online SIP Investment?

Here are three simple ways by which you can increase your online SIP investment.

• Select The Right Scheme
If you are interested in SIP investment plans that allow step-up option where you can enhance the amount regularly, ensure that it matches your risk profile. For example, if you are an aggressive investor, you can opt for a mid-cap equity fund. Or, if you are a conservative investor, you can look at balanced funds.

• Determine The Frequency
You can choose the frequency and the amount by which you want to increase your SIPs. It can be semi-annual or annual. An appraisal or bonus is the best time to start increasing your SIPs. It is always a wise decision to align your additional earnings to existing financial goals.

• Identify Your Investment Cap
You can decide to put a cap on the maximum amount of money you wish to invest every month in SIPs. When you choose this option, your SIPs can keep increasing till they hit the ceiling amount set by you. Once this maximum limit has been hit, the SIP then acts as a regular SIP with the same investment amount every month.

SIPs allow you to invest periodically and help your wealth grow. You can achieve your long-term financial goals with regular small investments and gradually increase your SIPs every year to achieve your financial goals sooner. You can either increase your SIPs by a fixed amount or a certain percentage, depending upon your financial goals. You may contact IndiaNivesh Ltd. if you wish to start a SIP investment plan. We can help you choose the right mutual fund schemes based on your financial goals, risk tolerance and investment horizon.

Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.


Tax Saving Options - 4 Tax Saving Investment Options for Risk Takers

Section 80C of the Income Tax Act allows a deduction up to a sum of Rs. 1.5 lakhs on certain tax saving investment options. These tax-saving investment plans include Life Insurance Premium, 5-Year Tax Deposits, Public Provident Fund, National Savings Certificate, and so on. This is the key reason Section 80C is a sought-after section when we talk about tax planning. However, instead of investing in an ad hoc way, if you choose the tax-saving investment options as per your risk profile, it can prove to be more beneficial. It may even help you to achieve your financial goals in a better way.In this article, we discuss 4 best tax saving investment options offering market-linked returns that can help you create long-term wealth.1. Equity Linked Savings Schemes (ELSS) Commonly known as Tax Saving Fund, ELSS is a diversified equity mutual fund offering tax-saving benefits. This tax-saving investment option has a mandatory lock-in period of 3 years. The minimum application amount is as little as Rs. 500 and there is no upper limit to the amount you can invest. The investments can be made either in lumpsum or by SIPs (Systematic Investment Plans). SIPs are regarded as the better way of investing in ELSS as they provide the advantage of compounding and rupee cost averaging. While selecting this tax saving investment scheme, look for funds which have a consistent performance record and follow robust investment processes. If you choose the right scheme, ELSS has the potential to offer attractive inflation-adjusted returns. The investment style could be value, growth or a combination of the two based on the investment mandate of the scheme. 2. Pension Funds Pension funds offered by Mutual funds, are one of the preferred tax saving investment options in India. They are effective investment tools for retirement planning and tax planning. Most of the pension funds are hybrid in nature i.e. they invest in equity as well as debt. The returns on pension funds depend on the proportion in which the scheme invests in equity and debt. It also depends on how efficiently the scheme has been managed across the market conditions. Pension funds have a 5 year lock-in period and an exit load which can extend up to retirement. At the vesting age, you can systematically redeem the units held in the folio/account by opting for a regular pension. This is the reason most people opt for pension funds for tax saving investment options in India. 3. Unit-linked Insurance Plans (ULIPs) Typically, these tax saving investment options are insurance cum investment plans. They enable you to invest in equity and/or debt instruments. You can simply select the allocation option as offered by ULIPs. Fund options are classified as aggressive, moderate and conservative. Aggressive funds invest only in equity, moderate funds invest in a mix of equity and debt whereas conservative funds invest purely in debt instruments. ULIPs not only offer investment returns that are market-linked but also provide insurance cover which is generally 10 times the insurance premium you pay. To enable you to track the performance of the fund, this tax saving investment option declares its Net Asset Value at regular intervals. ULIPs come with a compulsory lock-in period of 5 years and also have a minimum premium paying term. The overall term of the policy differs from one product to the other. However, if you want to claim the tax benefit, the policy should remain active for a minimum of 5 years. In the case of eventualities, the fund value or the sum assured (whichever is higher) is paid to the beneficiary. An important point to consider is while ULIPs may serve as a great tax saving investment option you must handle your investment and insurance needs separately. This helps you to pick the right investment instrument for long-term wealth creation and also have optimum insurance coverage. 4. National Pension System (NPS)Erstwhile available only to the government employees, NPS is a trusted tax saving investment scheme which was introduced to the private sector in 2009. If you are between 18 years of age to 60 years and belong to the unorganised (private) sector you are eligible for NPS. The contributions towards this tax saving investment plan are voluntary. You can invest in any of the following two accounts:• Tier-I Account This is a mandatory account where the minimum investment required is Rs. 500 per contribution and Rs. 1,000 per year. The account is frozen if you fail to pay the yearly minimum contribution. In order to unfreeze this account, you must contribute the total sum of contributions missed along with a penalty of Rs. 100 per year. Under this account, premature withdrawals are not permitted before you attain the age of 60 years. However, they can be allowed only in the form of repayable advance if you have completed 15 years. In addition, such withdrawals are permitted only in case of emergency or critical illness. This is because the main aim of this account is to build a retirement corpus and buy a life annuity. This account can be operated anywhere in the country irrespective of the job location and employer. • Tier-II AccountUnlike the Tier-I account, Tier-II account is a voluntary account. You first need to have a Tier-I account to open a Tier-II account. It can be opened with a minimum contribution of Rs. 1,000. From Tier-II account, you can withdraw as and when you wish to. The withdrawals do not attract a penalty of any sorts. So, this account serves just like your savings account.There are two investment choices while investing money in NPS – Active or Auto. Under ‘Active', your money is invested in various asset classes. You can decide your asset allocation into the specific asset classes such as ECG. E stands for Equity and C denotes credit risk-bearing fixed income instruments other than government securities. G represents the central government and state government bonds.Under ‘Auto’, money automatically gets invested according to your age profile. If you do not choose an option out of the two, the default option is always ‘Auto Choice’. These are the best tax saving investment options that can be ideal for risk takers. ELSS is the most liquid option but to reap more benefits it is best to stay invested in it for at least 5 years. Pension Funds and NPS are good investment avenues for tax planning as well as retirement planning. As far as ULIPs are concerned, remember to deal with your investment and insurance needs separately. You can contact IndiaNivesh Ltd. if you need assistance with tax planning and investment guidance.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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What is NAV? – Net Asset Value & its importance in Mutual Funds

Whether you are a beginner mutual fund investor or an experienced one, you inevitably come across the abbreviated term ‘NAV’. You may try hard to keep the investment jargon at bay, but this one term seems to crop up a lot. For example, when you buy and sell mutual funds, you need to know what is NAV and NAV importance in a mutual fund. In this article, we discuss everything there is to know about NAV including what is NAV and how is it calculated. What is NAV?NAV stands for Net Asset Value of a fund. Based on this net asset value, the asset management company and investors both can keep a count on the number of units the investors hold in a fund. Net asset value denotes the price of each unit of a mutual fund.Now that we know what is NAV, let us see what is NAV Value in Mutual Funds. What is NAV Value in Mutual Funds?The NAV per unit is the market value of securities divided by the total number of units of the scheme. To put simply, the performance of a particular mutual fund scheme is denoted by its NAV. Mutual funds collect money from several investors and invest it in the securities market. Since the market value of securities fluctuates every day, NAV of a mutual fund scheme also changes on a day to day basis.Generally, mutual funds begin with a unit cost of Rs. 10 and as the fund’s assets under the management grow, the price keeps rising. What is NAV and How Is It Calculated?NAV computation is undertaken once at the end of each trading day on the basis of the closing market prices of the portfolio’s securities. Let us understand what is NAV and how is it calculated in this section.• General Net Asset Value CalculationSuppose, a mutual fund scheme has a NAV of Rs. 500. So, if you want to buy one unit of that mutual fund you will need to pay Rs. 500 for it. Conversely, assume you invest Rs. 5,000 in a mutual fund scheme which has an NAV of Rs. 500. It will allow you to buy 10 units of that fund. • Daily NAV CalculationOnce the market closes at 3:30 p.m., all mutual fund companies estimate the worth of their portfolios every day. The market opens the next day with the previous day’s closing share prices. The fund house or asset management company subtract every payable to calculate the NAV of the day. The asset value of the fund is arrived at after deducting the daily expenses to manage a fund. The day’s cost per unit is calculated by dividing the total asset value by the number of units issued so far. Since most of the funds are open-ended, fresh withdrawals and new investments can impact the units. If the fund manager deems fit, they can sell some shares or put in an additional sum. Is There Any Myth About NAV?Many investors think that if they invest in a fund with lower NAV, they have a better scope for a price increase and those that already have a higher NAV may not have the scope for a price increase. This compels them to invest in a scheme with lesser NAV.For example, you get units allotted at NAV 10 if you invest in NFO. But, if you invest in a fund which was launched 3 years ago and has an NAV of 50, you will earn lesser profits comparatively. This is not true. The performance of any mutual fund is dependent upon the performance of the securities involved in the portfolio. Plus, NAV is a combination of costs such as management fees, distribution fees and the expense ratio of the fund manager. The chances of growing your money depend completely on the market situation, the quality of securities in the portfolio and the fund manager's performance.When we buy a mutual fund at its NAV, we buy it at its book value. But what we really should be buying in a mutual fund scheme is its performance and not its NAV. This is why it is essential to keep a track of past records of a mutual fund’s performance and compare its returns over similar periods. What is NAV In SIP (Systematic Investment Plans)?NAV in SIP is the same as the NAV of a mutual fund. SIP and lump sum are two methods through which you can invest in a mutual fund scheme. SIP involves investing a fixed amount of money every month in a mutual fund of your choice. The amount gets automatically deducted from your bank account every month. Thus, it is regarded as a disciplined approach to investing in mutual funds. This is usually preferred by salaried investors looking to force save every month. On the other hand, lumpsum investment involves investing a large amount of money in a mutual fund scheme at one go. This is usually preferred by investors who have a surplus of cash ready to invest.So, no matter which method of investing in the mutual fund do you opt for, the characteristics remain the same. NAV in SIP and NAV of mutual funds via lumpsum investments remains the same. It is advisable to look at the fund’s total return instead of only tracking the changes in its NAV to judge the overall performance of a mutual fund. Also, you may look at the historical performance and current cost among other parameters before investing in a fund. If you need any assistance to invest in the mutual fund market, you may contact IndiaNivesh Ltd. We can help you select the right mutual funds for your portfolio based on your investment horizon and financial goals.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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If you are looking for more flexibility than you can opt for a flexible recurring deposit scheme.  Frequency of Investment SIP can be started with a small amount. It is your choice to invest in SIP on a weekly, monthly and quarterly basis. In the case of recurring deposits, you can invest a fixed amount on a monthly basis. Choice of Investment SIP gives you the option to invest as per your risk appetite. Based on your risk-taking capability you can invest in different mutual fund schemes like equity, debt, hybrid, etc. On the other hand, a recurring deposit has no investment options. To earn a fixed return, you have to invest a fixed amount of money on a monthly basis. Tenure You can opt for SIP investment for any tenure or duration of time. The minimum period of investment is 6 months. Whereas, in the case of recurring deposits, they have a fixed maturity date. 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  • Gold Exchange Traded Funds (Gold ETFs) - Overview & how to invest in it

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You need to buy a minimum of one gram of gold which is equivalent to one unit of Gold ETF. Investors can invest in Gold ETFs from any location in India. Moreover, the difference in price (due to GST) will not be applicable.3. Cost efficiencies: Unlike many investment avenues, there are no entry or exit loads with Gold ETFs. The only cost involved would be the brokerage fees. 4. Risk: Unlike physical gold, there are no storage hassles or theft fears with Gold ETFs. Additionally, gold prices are not prone to frequent fluctuations. This makes Gold ETFs a relatively safer choice. 5. Tax efficiencies: Gold ETFs do not attract any wealth tax or securities exchange tax. Also, if they are held for a period of more than one year, the gains are treated as long-term capital gains. For anyone interested in holding gold, these ETFs provide a tax-efficient alternative. 6. Diversification: Gold ETF investments can help to bring diversity in the investment portfolio. During volatile market conditions, they can help to stabilise or improve the overall returns for you.7. Collateral: Gold ETFs are accepted as security collaterals for loans or capital borrowings by many financial institutions. Why is investing in Gold ETFs better than traditional forms of gold? You do not need to worry about impurities or adulteration in the metal As ETFs are held in electronic form, there are no storage related issues or costs Easy trading on the stock exchanges and hence high liquidity Real-time tracking of investments No mark-ups costs such as making charges, wear and tear involved The price of Gold ETFs remains the same throughout the country. However, the gold prices can vary from one location to another.  How does Gold Exchange Traded Fund work? The investment is converted into unit of gold basis the cost applicable at the allotment time. For instance, the cost of gold (per gram) on a particular day is Rs. 3000. Ms. X wants to invest Rs. 60,000 in Gold ETFs. Her investment amount will get translated into 20 gold units. At the back-end, physical gold acts as security for these ETFs. For example, if you invest in Gold ETFs, the entity at the back-end purchases gold. They act as the custodian for the investment and also guarantee for the purity of the metal. The stock exchanges assign the responsibility of buying and selling gold to authorised members or participants which in turn can be used to issue ETFs. These are usually large companies. As a result, these authorised members ensure that there is parity between the gold cost and ETFs. How to invest in Gold ETFs? Gold ETF investments are a simple affair.1. Choose a broker or fund manager: Many financial institutions (including banks) offer Gold ETF products. Similar to the online share trading, you would need to reach out to a fund manager or a firm which will trade on behalf of you.2. Demat and Trading Account: In order to invest in Gold ETFs, you need to have a demat account and an online trading. You can apply for these accounts online with the broker or such service provider by providing details like PAN, Identity Proof, residential proof, photograph and a cancelled cheque (for bank account linkage).3. Online Order: Once the accounts are in place, you can select the desired Gold ETF and place the order through the broker’s online portal. You can also opt for Mutual Funds which have an underlying Gold ETF.4. Confirmation: The placed orders are then routed to the stock exchange. The purchase orders are matched with the corresponding sell orders and accordingly executed. A confirmation email or message is sent to you. Who all should invest in Gold ETFs? Gold is a relatively safe and stable investment. Its prices do not fluctuate as much as equities. Hence, Gold ETFs can be a good choice for you, if you do not want to take too much risk. Additionally, since these ETFs are tradeable easily on the stock exchange, they are useful if you are looking for an investment opportunity with high liquidity. Hence, it is a good option for you to diversify your portfolio. So, if you meet the requisite objective of investment, Gold ETF is a good option for you as well. Things to keep in mind while investing in Gold Exchange Traded Funds Here are some tips that you could use while investing in Gold ETFs Gold is generally considered as a stable asset. However, you should not forget that the Net Asset Value (NAV) of Gold ETFs can also fluctuate basis market volatility As an investor, you need to bear brokerage fees or commission charges for Gold Exchange Traded Funds. Hence, you should check these costs while deciding on the broker or fund manager However, you should not make the decision on the basis of price alone. Consider the broker/ fund house’s past track record, services provided, type of clients handled etc. before choosing the service provider Do not over-invest in Gold ETFs. It is usually suggested to restrict investment in these ETFs to 10% of the entire portfolio. Final Words A smart investor knows that all that glitters is not gold. A good fund manager or firm helps choose the best Gold ETF products in India. IndiaNivesh, a well-known financial services company can help in this regard. With their rich experience in the Indian market and in-depth understanding of the financial ecosystem, they have helped numerous customers to grow their wealth and fulfill their financial goals.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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