Everything you wanted to know about SIPs :: Business Line

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

A guide to the procedures in starting and stopping systematic investment plans

A systematic investment plan (SIP) is increasingly becoming the preferred mode of investing in mutual funds. SIP reduces the chance of investing at the wrong time and losing sleep over a wrong investment decision.

A mutual fund SIP is similar to a recurring deposit. Every month, on a specified date, an amount you choose is invested in a mutual fund scheme of your choice. Several general queries are received from investors over their SIP transactions. Here are those which are frequent.

I have a folio with a mutual fund. How do I start a SIP here?

Starting a SIP is pretty simple. You need to fill out a SIP registration form with the scheme name, monthly instalment amount, SIP date, SIP tenure and bank details. You can use the auto debit facility for SIP instalments payment by filling up the auto debit mandate form. It takes about 21 to 30 days to register the auto debit with the bank. You will receive a confirmation once the mandate is registered and the SIP account has been set up.

The debit into your account for the first SIP will happen on the execution date as indicated by you, the investor, in the application form.

Can I redeem the investments accumulated in a SIP? If so, will the SIP cease?

Yes, you can redeem the units accumulated in a SIP without affecting the continuation of the SIP for the remaining tenure. To stop the SIP, one needs to provide a written request duly signed.

What about partial redemption of the accumulated units in a SIP? Can I continue with the balance instalments after such redemption?

Yes. You can withdraw the accumulated units either partially or fully by giving a redemption request. However, one needs to bear in mind the applicability of exit load and capital gains. The redemption will not affect the continuation of the SIP.

I started a SIP six months ago choosing the dividend option. What should I do to change it to growth option? Will the change be applicable only to future instalments? What should I do to convert the existing units in dividend option to growth option?

Your current SIP cannot be changed from dividend to growth option directly. You will need to stop the current SIP with a written request and provide a new SIP registration with growth option. You can give a separate request to change the accumulated units in the current SIP from dividend to growth option. As this change amounts to a switch transaction, one needs to bear in mind the applicability of capital gains, exit load.

My SIP debit from the bank did not go through for a few months as there were no funds. Now the mutual fund has terminated the SIP. Is that allowed?

The Scheme Information Document contains details of when a SIP ceases. If a SIP auto-debit is not honoured for a few consecutive instalments (the number of instalments is usually three and will be mentioned in the scheme documents for the respective fund), the SIP will cease and a communication will be sent to the investor.