SIP investments have proven to be a blessing in disguise in the harsh world of financial planning. They save you the headache of market timing, provide a disciplined approach to investing, and also align investments with regular income flows. Above all, the systematic investment strategy revolves around rupee cost averaging. In a SIP, you allocate a specific money on a regular basis (usually monthly), and the units are purchased on that date. It lowers your average cost and increases your ROI over time.
What are SIPs in Peer to Peer Investing?
SIP is an abbreviation for Systematic Investment Plan. It is a method of investing a predetermined sum of money in a peer to peer investing loan on a regular basis. When you set up a SIP, a certain sum is automatically taken from your bank account on a regular basis (monthly, quarterly, weekly, etc.).
The sum deducted is subsequently invested in a loan pool of your choice, where it grows and increases over time. SIPs are popular because they are cost-effective, and having an automated mandate makes it easier, letting you to cross something off your to-do list.
Another sort of peer to peer investing option is a lump sum purchase, in which you fund a loan scheme as you have the funds. For example, Ms. Pari received a 50,000 bonus from her company and deposited the entire sum in a loan of her choice all at once!
How to invest in SIP with Monexo?
As technology advances, the procedure becomes easier for you as an investor. As an investor, you must do the following steps:
- KYC should be registered for all holders.
- You must register a bank mandate via which a specified sum will be debited and sent to specific funds.
- Following both registrations, you are free to make any loan for any duration and for any amount up to the amount specified in your mandate.
- The preceding procedure assists the investor in initiating SIP investment.
How do SIP Benefits differ from that of a Lump sum investment?
Benefits of SIP over lumpsum investments are:
- Rupee Cost Averaging: SIPs allow for investment during market fluctuations, potentially lowering the average investment cost over time.
- Compounding Benefits: SIPs facilitate the reinvestment of returns, creating compounding benefits over the long term.
- Convenience: SIPs require minimal investment and can be discontinued without charges, making them a manageable and flexible investment option.
How do SIP differ from RD?
The article discusses two investment tools: Recurring Deposits (RDs) and Systematic Investment Plans (SIPs), highlighting their differences primarily in terms of risk and returns. RDs are a secure investment option with minimal risk, offering a fixed income based on the interest rate set by banks. They are suitable for conservative investors who prefer low-risk options. SIPs, on the other hand, carry some level of risk as they are affected by market conditions and the types of securities invested in. Despite this, SIPs cater to both conservative and aggressive investors due to their versatility. The income from SIPs is not predetermined and can vary.
Before choosing between SIP and RD, investors are advised to identify their investment objectives and risk tolerance. Tools like Monexo SIP Calculator are available to aid in planning and calculating future returns.Ultimately, the choice between SIP and RD depends on an individual’s specific financial goals and risk preferences. Peer to Peer investing SIPs have the potential for higher returns compared to RDs and offer significant tax benefits, but they are also exposed to market volatility.
How can SIPs help with your Child’s Education and Future Planning
Education costs in India are rising, with educational inflation estimated at about 11%. The National Sample Survey Office (NSSO) report from 2008 to 2014 indicates that the annual cost of education has increased 2.75 times since 2008, while per capita income has only risen 2.49 times. This growing disparity is creating a significant financial burden on families.
In addition to the numerous advantages, a long-term perspective maximizes returns from peer to peer investing while mitigating economic volatility risks. Consider increasing the SIP amount annually to build a robust education fund. While SIPs offer returns that can beat inflation, it is advisable to have a financial cushion to ensure your child can pursue higher education without financial constraints.
Can NRI (Non-Resident Indian) Investors invest in SIPs?
Non-Resident Indians (NRIs) can invest in Mutual Funds in India through Systematic Investment Plans (SIPs) by following these steps:
- Select the appropriate investment option and the best peer to peer investing SIP scheme from the available range of loans.
- Decide the periodicity of the SIP, which can be monthly or quarterly.
- Set up an NRI Bank account for electronic deduction of the SIP amount. This can be done through a Direct Debit Mandate or Electronic Clearing Service (ECS) mandate, or by issuing post-dated cheques.
How do SIPs deferrer PPF (Public Provident Fund) for Tax Savings
SIP is a way of investing in mutual funds and peer to peer investments monthly, offering market-linked returns. On the other hand, PPF is an investment scheme that guarantees stable earnings and tax advantages. The main difference between the two lies in their tax benefits. SIP investments provide tax savings only on the amount invested, while PPF gives tax savings on the invested amount, the interest accrued, and the amount on maturity.
Another distinct factor is that SIP does not have a maximum investment limit while PPF caps the maximum investment at Rs. 1,50,000 per year. When deciding between the two, PPF is recommended for those who prefer low-risk investments, while mutual funds via SIP are suggested for those willing to undertake moderate risk for potentially larger returns.
It’s also important to note that PPF investments have a 15-year lock-in period, which makes them less liquid. Both PPF and mutual funds offer tax incentives under Section 80C, but PPF has the added benefit of tax-free returns and maturity amounts. Historically, a 15-year peer to peer investing SIP can yield 1.5 times the returns of a PPF, making it attractive in terms of returns and liquidity.
Conclusion
SIPs are fantastic financial tools for beginners looking for a systematic and disciplined approach to investments. SIPs provide a solid foundation for long-term wealth growth by offering benefits such as disciplined investing, cost-effectiveness, diversification, and the power of compounding. Investors can select the best SIP for their financial goals by taking into account aspects such as investment objective, risk tolerance, fund performance, expense ratio, investment horizon, and asset allocation.
FAQs:
Are SIPs good for beginners?
SIPs allow investors to contribute predetermined sums to their mutual fund at regular periods, such as monthly or quarterly. SIPs, which are especially popular with newcomers, offer a low-risk and cost-effective way to stock market and peer to peer investments.
What is the lowest amount I can start SIP with?
You can start investing in Monexo Grow with as low as Rs.5,000 per month.
Is peer to peer investment SIP good for small investors?
You can start investing with as little as INR 5000 per month using Monexo Grow SIP. This is a far smaller investment than the most typical investing options, such as fixed deposits. This ensures that the majority of people who have recently begun earning can invest in order to attain their long-term goals.
Which P2P RBI approved platforms are good to start investing?
You can start investing with Monexo. It gives you option of investing in form of SIP as well as lumpsum.
