Can you increase or decrease your SIP sum?

IF you know what your life’s financial goals are, investing in mutual funds might not seem that difficult. Investors who invest without any specific goals usually find it difficult to make an informed investment decision. Investors who are new to mutual fund investing or financial planning in general do not understand that they cannot invest in any scheme by just looking at its past returns. An investor must only invest in a scheme if his / her investment objective aligns with that of the scheme.

For example, if you are looking for a scheme that offers liquidity, you cannot invest in ELSS schemes. That’s because ELSS is a tax saving scheme that comes with a predetermined lock-in period. Similarly, those who are investing in mutual funds for saving tax cannot invest in any other scheme except for ELSS. Every mutual fund scheme has an underlying benchmark which it aims at outperforming. The best part about mutual funds is that it offers diversification like no other scheme.

To earn long term capital appreciation investors must not depend on any one asset class. One must adequately diversify their investment portfolio with both equity and debt.

Mutual fund investors have the choice of either making a lumpsum investment or starting a SIP in mutual funds. Lumpsum investors receive more units if the NAV of the scheme is low at the time of investment. Those who do not wish to expose their entire finances to market volatility can start a SIP in mutual funds.

Systematic Investment Plan is a tool that lets you invest small amount at regular intervals in a mutual fund scheme of your choice. An individual must be KYC compliant to initiate a monthly SIP in mutual funds. All an individual has to do is decide on the monthly SIP sum and decide which mutual fund scheme to invest in. And if you instruct your bank to allow auto debit, every month on a fixed date, the predetermined SIP sum is debited from your account. In quantum with the SIP sum and relying on the mutual fund’s existing net asset value (NAV), investors are allotted units to their portfolio.

Can you change the SIP sum?

The beauty about SIPs is that they are far more flexible in nature than any other investment option. For example, if you are earning Rs. 50,000 per month and wish to invest Rs. 10,000 in mutual funds via SIP, you can do so from the comfort of your home or office in a jiffy. After one year, if you get an increment and your monthly salary is Rs. 65,000 and you wish to invest more in mutual funds, you can instantly change the SIP sum and the same shall reflect on your mutual fund account. After this, you can easily invest the revised SIP sum just the way you have been investing for the past one year. Similarly, due to some financial responsibilities, if you want to decrease your SIP amount, you can do so without having to worry about anything. In fact, you can even stop the SIP if that particular mutual fund scheme has been consistently underperforming. There are no penalties involved for modifying the SIP sum.

Investors can refer to SIP calculator, if they are unsure about how much they need to invest regularly in order to achieve their financial goals. To ensure that you are able to achieve your goals, invest regularly via SIP and keep tracking your scheme’s performance every six months. Also, do remember that mutual fund investments do not guarantee returns. Investors are expected to invest according to their risk appetite.