Understanding the Mutual Fund SIP

If you hear the phrase “mutual funds SIP” you may automatically think this is another type of mutual fund. Unfortunately, this is a common misconception among many newbie investors. However, an SIP or Systematic Investment Plan isn’t actually a type of mutual fund. Instead, it is an investing method for investing in mutual funds.

How to Invest in a Mutual Fund

There are two primary ways that you can invest in a mutual fund. One way is with a one-time payment. If you want to invest into the fund directly, all you have to do is hand over a check and receive your units. The number of units that you receive will be determined by several factors, including the entry load, which is the fees you pay, as well as the Net Asset Value.

Another option is with periodic investments, which are referred to as an SIP. Learn more about the SIP here.

Periodic Investments

This is when mutual funds SIP comes into play. It means that each month you are going to commit to making an investment of a certain amount. The number of units you get will depend on the price of the fund at the time each investment is made. This means that some months you will receive more units, and others you will receive less. For some, this is a preferred way to invest, as it reduces the amount you invest initially, and will help your portfolio continue to grow.

If you are interested in a mutual funds SIP, it may be a good idea to work with a portfolio manager. They can help set you up with the desired arrangement and investment amount that you are comfortable with.

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