Systematic Investment Plans, better known as SIP Mutual Funds, are a type of Investment that can be made by an individual, firm or company for a specific amount over a period of time. This time may vary from about six months to over three years. Equity Mutual Funds, Debt Funds and other Mutual Fund Investments can be done on an SIP basis. But, the question remains, why we should invest in such time bound SIP and not in the day to day share market where our money will be more flexible.
The first benefit of SIP Mutual Funds is for the beginners in investment, in short the layman, who has no basic idea of day to day market operations. It may also happen that a firm or company may have money to invest but not the time and resources for day to day transaction. In these cases, The SIP Mutual Funds are an easy way to invest an amount which is allotted to different schemes and get the net return from the same after the due time period is over.
Another important aspect of the SIP Mutual Fund is the Tax Exemption that attracts a lot of potential investors. The tax laws in India states that if you invest in an SIP for a period of ten months or the minimum available period, whichever is lower, the taxation on that amount of investment for Capital Gain Taxation Head is exempted. Many firms and companies, invest in SIP to exempt themselves from paying hefty taxes.
SIP also reduces the risk of day to day loss by nullifying the investment loss with the profit and presenting the net profit after the stipulated time, hence the investor does not need to worry about the daily crash and boom in the market, or about his investment in one particular share or fund. The money is allotted in a way to ensure that the investor gets benefited out of the long term investment.