Here’s how to invest in mutual funds via SIP

Systematic Investment Plans (SIPs) are investment plans offered by mutual fund houses from time to time to invest a fixed amount in a mutual fund scheme. Investment can be started from Rs 500 per month through SIP.  Money9 helpline hosted Onkeshwar Singh, Head – RankMF, Samco Securities to discuss ways to invest through SIP.

Edited excerpts

Anindya Dutta, Kolkata: I invest in mutual funds through monthly SIP. My consultant is advising me to switch to the Smart SIP model instead of the monthly SIP. Would this be appropriate?

Singh: Smart SIPs calculate the margin of safety. It calculates the intrinsic value of the mutual fund scheme, whether the value is high or low at that point in time. If the value is high then it will keep the money in liquid form, if low then it will invest in equity. SIPs are for a longer duration as they do not consider the market forces. Whereas Smart SIP will also consider the market forces and will give additional 4-5% returns.

Arun Singh: How does Step-up SIP work? Can we grow 5% every year?

Singh: Yes, of course. The top or Step-up option is available with AMC. When you register for a SIP, the top-up is an option for the current one that you can apply for. You can also set what percentage you want to keep.