Can we skip SIP installment?

Questions you need to ask before starting a monthly SIP

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Mutual funds are a popular way to ensure financial security in the future. Many people invest in mutual funds with a monthly SIP that allows them to save and invest systematically in regular intervals. This can help people safeguard their future financial interest, multiply their money over time, and beat inflation, with small yet steady investments that do not put pressure on their current lifestyle.

If you are thinking of investing in mutual funds online through SIPs, there are some questions to consider before you start.

Q1: Why do you want to invest with a monthly SIP?

Different people have different goals. You could be saving for your retirement or for a child’s higher education abroad. Figuring out the goal behind your investment can help you pick the right mutual fund. For instance, equity funds can be riskier but also offer better rewards and can be useful if you need money in the near future. Debt funds, on the other hand, are low on risk but can come with moderate returns, which could be more beneficial if you’re young and planning for your retirement. Moreover, knowing your goals also helps you understand the right investment tenure and amount for your monthly SIP.

Q2: Does the fund offer tax benefits?

Taxes can eat into your returns and leave you with a reduced amount. Hence, when you invest your money, you must know whether or not your investment qualifies for a tax rebate. For instance, you can get tax exemption under the ELSS scheme up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961. This can help you save a substantial amount of cash.

Q3: What is the expense ratio?

The expense ratio, or the percentage fee you pay towards managing your funds can determine your overall profit and impact your earnings greatly. Most mutual funds India have an expense ratio between 1% and 2.5%. This is deducted from the rate of return of your investment and the remaining portion is given to you as profit. The higher the expense ratio, the lower are be your earnings and vice versa. So, pay close attention to the expense ratio and pick an investment that has a low expense ratio.

Q4: Does the SIP have a lock in period?

Some mutual funds can forbid you to withdraw your funds till the lock in period is over. This can be a cause of concern in case of a financial emergency. Hence, it helps to find out if the fund you are investing in has a lock in period or not. Accordingly, you can make sure you have savings to ensure that you aren’t at a disadvantage if you have a financial emergency.

Mutual fund investments are a popular choice in India. And thanks to SIPs, you can start investing in mutual funds online on Moneyfy for as little as Rs. 100. This allows people of all income groups to save for their future needs without it becoming a burden on the pocket. Moreover, using apps also provides easy solutions to any financial problems, further helping you invest your hard earned money in the right SIPs.

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