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Finance

A Beginners Guide to Algorithmic Trading Options

What are algorithmic trading options?

Algorithmic trading is a process of using computer algorithms to place orders and trade securities. There are various algorithmic trading strategies, but they all use computers to decide when and how to trade.

One type of algorithmic trading is options trading. Algorithmic traders use options to profit from changes in the cost of the underlying asset. The buyer of a put option is betting that the price of an underlying asset will go down before the contract’s expiration date.

Two option types

The two types of options are calls and puts. On or before the option’s expiration date, a buyer may buy an underlying asset at a set price by purchasing call options. A put option gives the buyer the right to sell an underlying asset at a specific price on or before the option’s expiration date.

So, what does this mean? Let’s look at an example: say that algorithmic traders believe stock XYZ will rise in price. They can buy call options as a way to profit from this movement. If you buy one call option contract, it gives you the right to purchase 100 shares of XYZ stock for $50 per share until your selected expiration date, which could be several weeks away. That means if XYZ increases and is trading at $60 per share when your options expire, you can use your choice and buy the stock at $50 per share, then sell it at the current market price of $60 for a $10 profit per share.

On the other hand, if XYZ falls in price and is trading at $40 per share when your options expire, you can still exercise your option and purchase the stock at $50 per share. However, you would then be selling it at a loss of $10 per share. In this way, options allow traders to profit from the underlying asset’s rising and falling prices.

How do I trade options?

To trade options, you first need to open an account with a brokerage firm that offers options trading. It would help if you then choose an options broker, the firm that will execute your options trades.

Brokerages typically charge a commission for each options trade you make. You also need to be aware of the bid-ask spread when trading options. It’s the difference between the selling price and the buying price. The wider the bid-ask spread, the more expensive trade options are.

Ready to start trading?

You will first need to choose an underlying asset. It could be a stock, ETF, index, or commodity. It would help decide whether you want to buy or sell calls or puts and select an expiration date. Finally, you place your trade.

How do I choose the best options broker?

Before choosing an options broker, it’s essential to determine your type of trader and then find a brokerage firm that offers products and services tailored to your needs. It means finding a firm that provides primary and complex strategies like algorithmic trading, including the option types you plan to use. You also need to consider commissions, fees, customer service availability, educational resources, and more when selecting an options broker.

Are there any risks associated with trading options?

The most significant risk in using algorithmic trading options is liquidity risk. If you cannot buy or sell your options quickly because there aren’t enough other traders in the market, you could end up losing money. You should also be aware of the risks associated with the underlying asset you choose to trade. For example, if you trade oil futures options and the oil price falls sharply, you could lose a lot of money.

Follow this address to start algorithmic trading options today!

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Finance

Do you need debt funds in a portfolio?

As investors, we are constantly trying to ensure that our overall portfolio is able to balance the investment risk and generate risk adjusted returns over the long term. One way to balance risk is to diversify your investment portfolio across asset classes and money market instruments based on your risk appetite your investment horizon and your ultimate financial goal.

Mutual funds can be one way to achieve their life’s short-term or long-term financial goals. These are market linked schemes that invest in various asset classes like equity, debt, gold, etc. Mutual funds collect financial resources from investors sharing a common investment objective and invest this accumulated pool of funds across various stocks, Government and corporate bonds, debentures, commercial papers, certificates of deposits, and other fixed income securities.

While equity funds are one of the most sough after mutual fund schemes because of their potential to generate high returns over the long term, several investors also consider debt mutual funds.

What is a debt fund?

We all know that equity funds invest the majority of their investible corpus in equity and equity related instruments to generate returns. A debt mutual fund on the other hand invests in fixed income securities and money market instruments. The investment objective of most debt funds is to generate stable returns whilst protecting the investor’s capital.

Reasons to consider debt funds for your investment portfolio

Here are a few reasons why retail investors must consider adding debt mutual funds to their investment portfolio:

Low expense ratio

Unlike equity funds that have a very high expense ratio, debt funds have a relatively low expense ratio. For those who do not know what an expense ratio is, it is an expense demoted in percentage form which includes several recurring expenses like management fees, operational costs, and other similar costs that must be taken care of to ensure the smooth functioning of the mutual fund scheme. Every mutual fund scheme has an expense ratio that is deducted from the investor’s overall capital gains. A mutual fund scheme with a high expense ratio may create a void in the investor’s overall capital gains.

Stable returns

Debt funds try to generate stable returns as opposed to equity mutual funds whose investment objective is to generate high returns by taking higher risks. This way, debt funds bring in the much needed stability to the investor’s portfolio. Equity investments are volatile and returns are uncertain. However, investments in debt funds may allow the portfolio to generate stable income.

High liquidity

A mutual fund investor must consider debt funds like liquid funds as these funds offer high liquidity. A mutual fund portfolio must maintain liquidity so that investors are able to liquidate their investments in case an unforeseen exigency arises. Since debt schemes like liquid funds invest in a portfolio of fixed income securities that come with a short maturity of up to 91 days, investors can consider these for building a medical fund or an emergency fund.

Almost zero exposure to equity

The returns generated by debt mutual funds are purely based on the underlying securities in which they invest. Since debt funds do not have any exposure to stock or other equity related instruments of publicly listed companies, any upheavals in the market are less likely to affect the performance of a debt mutual fund.

Diversification

We cannot emphasize any more the importance of diversification when it comes to mutual fund investing as investors are well aware of the consequences of carrying a concentrated investment portfolio. Investors can consider debt funds for diversification. This will allow them to balance the investment risk and give them an opportunity to leverage different asset classes.

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Finance

Things you need to know about ELSS

Tax season is around the corner and you must ensure that you have invested the right amount in a feasible tax saving instrument so that the government does not deduct a chunk of your hard earned money. But if you forgot to plan your investments at the beginning of the fiscal year, you will have to make a lumpsum investment so that you can submit that for investment declaration in your employer’s portal. In such a scenario, investing in Equity Linked Savings Scheme (ELSS) makes more sense. Not just that. Even if you want to plan your tax investments in a systematic manner, you can consider ELSS for bringing down your overall taxable income.

Today we are going to discuss ELSS and things that you need to know before investing in this tax saver fund.

What is ELSS?

An Equity Linked Savings Scheme is a mutual fund scheme that is commonly referred to as ELSS. ELSS is an equity mutual fund scheme that offers tax benefits. Investors can invest up to Rs. 1.5 Lacs every fiscal year in ELSS and claim a tax deduction for the same.

Here are a few things you need to know about the ELSS fund:

It predominantly invests in equity: The name of this tax saving mutual fund scheme is Equity Linked Savings Scheme. ‘Equity Linked’ means an investment scheme that is linked to the equity markets. Of its total assets, an ELSS fund may invest anywhere between 65 to 80 percent in stocks and other equity related instruments of publicly listed companies. This means that ELSS is a very high investment risk that also has the potential to generate better risk adjusted returns.

ELSS has the shortest lock-in period – ELSS is a tax saving scheme and comes under Section 80C of the Indian Income Tax Act, 1961. If you compare other tax saving instruments under Section 80C like Public Provident Fund or  Bank Fixed Deposit (FDs), ELSS has a short lock in period. Once you invest in ELSS, you cannot redeem your investments for at least 3 years from the date of investment. You cannot even partially withdraw your money that is invested in ELSS as it remains locked in for a minimum period of three years.

ELSS is ideal for long term wealth creation – Since ELSS is an equity oriented mutual fund scheme, investors generally invest in it for a longer duration. So, if you are investing in ELSS make sure that you have an investment horizon of at least five years or more. The longer you remain invested and continue to invest systematically the more chances you have of earning higher capital appreciation. Investors with financial goals that require long term wealth creation plan and know that they are going to have to invest in a tax saving scheme till they retire consider ELSS investments.

ELSS has SIP and lump sum investment options – Investors can either invest in an ELSS fund by making a one time lump sum investment or they can consider investing via SIP. A Systematic Investment Plan is the best way to create long term wealth with the ELSS fund as it allows the investor to save and invest a fixed sum at a periodic interval (typically every month) till the investor’s investment objective is accomplished. The ELSS investor can even use SIP calculator, a free tool that lets you calculate assumed future returns that your SIP investments can possibly fetch.

Like any other mutual fund investment scheme, ELSS does not guarantee returns. Talk to your financial advisor before investing.

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Finance

4 THINGS YOU SHOULD KEEP IN MIND WHILE INVESTING

When it comes to investing in mutual funds, mere mutual fund comparison to choose the best mutual fund schemes for your investment portfolio might not be enough. There are certain things that you as an investor must be aware of. In this article, we will understand four such things that you as an investor must keep in mind before investing in different types of mutual fund investment plans.

Things to keep in mind while investing

Following are a few things that an investor must be aware about before investing in mutual funds:

  1. Asset allocation strategy
    The asset allocation strategy is determined by certain aspects of risk – how much risk an investor can afford to take? How much risk does an investor need? And lastly, how much risk is an investor willing to take? Once you are clear on these questions, it will be easier for you achieve the broad framework for asset allocation – i.e., where should an investor invest and in what proportions. Based on your investment horizon, you can break your investment portfolio into three or four components – short-term financial goals that need to be in investment options with low risk profile such as fixed-income instruments, medium-term financial goals that can be invested in securities with slightly higher risk profile such as mix of both equities and debt, and long-term financial goals that can be allotted to securities with high risk profile such as equities.
  2. Portfolio diversification
    Diversifying your investment portfolio is a way of allotting and investing your money across different types of securities, asset classes, and locations. This helps an investor to considerably reduce their risks without compromising too much on the returns. Hence, rather than putting all your eggs in one basket, diversify them across different types of investments.
  3. Maintain liquidity
    It is important to maintain enough liquidity that can easily protect an investor against loss of income or drop in income or any other type of emergencies. Hence, it is recommended that an investor has an emergency fund in place that can cater to any type of emergencies that might come their way during their investment journey. As a general rule, it is advised to invest at least three to six months of your living expenses in securities that offer high level of liquidity with decent rate of returns such as money market instruments or cash and cash equivalents.
  4. Reviewing financial portfolio
    It is extremely essential for an investor to conduct regular reviewing of their financial portfolio. This will help an investor to distinguish underperforming funds and reallocate their investment if the mutual fund scheme has been constantly underperforming as compared to their underlying benchmark indices and other peer funds belonging to the same category of the mutual fund scheme. Additionally, all long-term investments are likely to turn into mid-term investments and ultimately into short-term investments over time. And it is crucial to appropriately adjust your mutual fund investments when the financial goal is near completion.
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Finance

10 best discount brokers in India

For ages, all stock market investors had to endure one common burden – high brokerage charges. Thankfully the advent of new technology and rapid adoption of internet services has made discount brokers in India more widespread and accessible to retail investors than ever before in stock market.

Who are discount brokers?

As against a full-service broker, discount brokers undertake market orders for reduced commissions. On the flip side, they do not provide investment advice. A discount broker is suitable for those with limited capital capabilities and those unwilling to pay for trade guidance.

How are discount brokers helpful?

They may be called discount brokers but there is no compromise in the services provided. These discount brokers’ easy-to-use trading platforms provide state-of-the-art facilities. Another beneficial thing is that most of the discount brokers in India offer very attractive brokerage fees and complete transparency along with additional benefits like advanced charts, real-time news, and analysis.

The top 10 stockbrokers in India

Here is a list comparing the brokerages of different discount brokers in India:

Broker Equity Delivery Equity Intraday Equity Futures Equity Options
Zerodha Nil 0.03% or Rs.20/ executed order, WIL 0.03% or Rs.20/ executed order, WIL Flat Rs.20/ executed order
Upstox 2.5% or Rs.20/ executed order, WIL 0.05% or Rs.20/ executed order, WIL 0.05% or Rs.20/ executed order, WIL Flat Rs.20/ executed order
Angel Broking Nil 0.25% or Rs.20/ executed order, WIL 0.25% or Rs.20/ executed order, WIL 0.25% or Rs.20/ executed order, WIL
Groww 0.05% or Rs.20/ executed order, WIL 0.05% or Rs.20/ executed order, WIL Flat Rs.20/ executed order Flat Rs.20/ executed order
5paisa Flat Rs.20/ executed order Flat Rs.20/ executed order Flat Rs.20/ executed order Flat Rs.20/ executed order
Kotak Securities 0.25% of transaction value Nil Intraday – Nil

Others – Rs.20/executed order

Intraday – Nil

Others – Rs.20/executed order

PayTM Money Rs.0.01/ executed order 0.05% or Rs.10/ executed order, WIL 0.02% or Rs.10/ executed order, WIL 0.02% or Rs.10/ executed order, WIL
Alice Blue Nil 0.05% or Rs.15/ executed order, WIL 0.05% or Rs.15/ executed order, WIL Flat Rs.15/ executed order
Samco 0.20% or Rs.20/ executed order, WIL 0.02% or Rs.20/ executed order, WIL 0.02% or Rs.20/ executed order, WIL 0.02% or Rs.20/ executed order, WIL
Fyers Nil Flat Rs.20/ executed order Flat Rs.20/ executed order Flat Rs.20/ executed order

Zerodha remains the most popular broker. Other players like the new entrant PayTM Money, Alice Blue, Samco, and Fyers also round up the record of top 10 cheapest stockbrokers in India.

Summing up

The current market scenario has the investor spoilt for choice. Depending upon the strategies used, participants now have various options to choose their partner in their stock market journey. To simplify the process of investing and reach your goals faster, you can also consult a financial expert. They can help you map out your investing strategy and this is especially useful at the beginning of your investing journey.

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Finance

Should you invest in low-cost index funds to create wealth?

Index funds are designed to replicate the performance of their underlying portfolio. These funds give investors an opportunity to spread their portfolio across securities of a specific index without changing portfolio composition. Index funds that invest in NIFTY have a portfolio comprising of the top 50 company stocks. Similarly, an index fund that invests in SENSEX will comprise of top 30 underlying stocks that form the index.

Because the fund manager of an index fund does not actively buy or sell securities from its underlying portfolio to generate capital appreciation, it is called a passive fund. The fund manager does not have to do intrinsic research to pick stocks for the index fund portfolio, neither do they have to manage the fund actively or decide which stocks to hold or which stocks to sell. This type of investment style is considered passive where the index fund aims to replicate the performance of its underlying securities rather than trying to outperform the benchmark like most other schemes.

Since these funds mostly invest in indexes that comprise of top 50 or top 30 company stocks, they give investors exposure to bluechip stocks. Blue-chip stocks consist of stocks belonging to large cap companies that are financially stable and have a solid reputation in the industry. Hence, investors who want exposure to a portfolio of securities that are less volatile than other equity oriented mutual fund schemes can consider investing in index funds.

Are index funds a low cost investment?

As mentioned earlier, index funds are passively managed. Although they have a fund manager overlooking the overall performance of the portfolio, there is very little participation involved. This makes index funds a cost effective investment option as opposed to other actively managed mutual funds that have a relatively high expense ratio.

The expense ratio of an index fund is usually below 1%, sometimes even less than .50%. For those who do not know, the expense ratio is the total recurring costs like management fees, operational costs, etc. which the Asset Management Company must take care for ensuring the smooth operation of the index fund. These expenses are recovered by the AMC by levying an expense ratio on the mutual fund. The expense ratio isn’t an additional charge but is a sum that is deducted from the investor’s total capital gains. In the long run, those who invest in mutual fund schemes with a high expense ratio might end up giving away a large portion of their capital gains.

Can you create wealth with index funds?

To create wealth with market linked schemes like index funds, investors need a long investment time horizon spanning over 5 to 7 years or more. That’s because even if you look at the stock market, you need to have patience to create wealth. Equity markets are volatile in nature and investments made in equity can generate negative returns in the short run.

Also, if you are planning on building a wealth corpus that can be Rs 1 crore or more, you need to start a monthly SIP in index funds. Systematic Investment Plan allows retail investors to save and invest a fixed sum regularly in index funds. Investors can decide an amount that they are comfortable investing and invest that sum regularly till their investment objective is accomplished. Investors who don’t know exactly how much to invest regularly to get closer to their ultimate financial goal can take the help of the online SIP calculator.

 However, the key to long term wealth creation is systematic and disciplined investing and investors must ensure that they do not stop their investment journey midway.

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Finance

What Is The Right SIP Amount?

Thanks to the technological advancements in the mutual fund industry, starting a Systematic Investment Plan in any mutual fund scheme is just a few fingertips away. All an investor has to do is download a mutual fund app made available by the aggregator and choose from a wide range of schemes offered by various AMCs and fund houses, or they can even log on to the website of a particular AMC whose scheme they want to invest in and start a SIP immediately after completing a few pre-investment formalities.

But the real problem which many first time investors face is that they do not know how much the monthly SIP should be. To understand whether the monthly SIP amount that you will be investing is the accurate amount or an ad hoc amount you may have to first understand what is it that you want to achieve with these investments in the long run. Based on that you might be able to narrow it down to the right monthly SIP sum.

But what exactly is SIP?

A Systematic Investment Plan (SIP) is one of the easiest ways to invest in market linked schemes like equity mutual funds. Since equity funds expose the majority of their portfolio to equity markets, their performance keeps fluctuating from time to time. In such a scenario, a SIP makes more sense as investors do not have to time the market and can instead small, fixed sums regularly. However, SIPs are not limited to equity fund investments and are available for all types of mutual fund schemes.

How can SIPs help target financial goals?

Investors who exactly know what they want to achieve and by what time find it simpler to strategize the SIP investments. SIPs are best suited for those who wish to invest for a longer duration and want to accumulate a commendable corpus through systematic and disciplined investing. However, that does not mean that you cannot start a SIP for a goal that needs to be achieved in the next 12 months.  However, SIPs that carry on for longer durations allow investors to manage market volatility and give their investments to generate returns across various market cycles.

Now let us assume that you have two different goals, goal A needs to be achieved in 3 years and goal B needs to be achieved in 10 years. Goal A requires you to build a corpus of Rs 5 lacs whereas goal B requires you to build a corpus worth 15 lakhs. Let us assume the mutual fund scheme delivers an average of 8 percent returns.

To achieve goal A, you will have to start a monthly SIP of Rs 12,355 whereas to achieve goal B, a monthly SIP of Rs 8,199 should suffice. If you want to make such calculations to understand the SIPs that you must be starting on a monthly basis, you can take the help of the online SIP calculator. This is an easy-to-use tool that any individual can take help of to solutions to their investment woes.

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Finance

Things you need to know about hybrid funds or balanced funds

When it comes to mutual fund investing, investors are expected to keep a balanced investment portfolio by spreading their investments across asset classes. However, these days it is possible to gain the benefit of more than one asset class through a single mutual fund investment. Although equity and debt as an asset class have their own merits and demerits, by investing in a hybrid fund, you can get the best of both these asset classes.

What is a hybrid fund?

A hybrid fund (also referred to as a balanced fund at times), is a mutual fund scheme that spreads its investible corpus across equity and debt. Every hybrid scheme has a different portfolio composition of these asset classes depending on what the investment objective and risk profile of the fund is. For example, equity oriented hybrid schemes predominantly invest in equity related securities as opposed to debt oriented hybrid funds that invest a minimum of 65% to 80% in fixed income securities.

Things to know about hybrid schemes

Different types of hybrid schemes

If you are planning on investing in hybrid funds, it is essential for you to know all the different types of schemes available for investment so that you can consider choosing one that is ideal for their financial goals –

Conservative Hybrid Fund: A conservative hybrid fund is an open ended mutual fund scheme that invests a majority of its investible corpus in while debt.

Balanced Hybrid Fund: A balanced hybrid fund is an open ended scheme that must invest a minimum of 40% to 60% in each of the two asset classes (equity and debt).

Aggressive Hybrid Fund: Of its total assets, an aggressive hybrid fund must invest a minimum of 65% to 80% in equity and equity related instruments, and the remaining in debt.

Dynamic Asset Allocation Fund: This hybrid fund has the leeway to shift its investment portfolio dynamically between asset classes to suit the existing market conditions.

Multi Asset Allocation Fund: This is an open-ended hybrid scheme that invests a minimum of 10% in each of the three asset classes (typically equity, debt, and gold).

Arbitrage Fund: This fund tries to leverage arbitrage opportunities by investing a minimum of 65% of its total assets in equity and equity related instruments.

Equity Savings Fund: An equity savings fund is an open ended mutual fund that tries to generate returns by investing in equity, debt, and arbitrage opportunities

Offers true diversification

A hybrid fund is able to offer retail investors diversification like no other mutual fund scheme. Other schemes like equity and debt funds can offer diversification within the asset class, however hybrid funds invest across asset classes, thus balancing the investor’s portfolio across fluctuating market cycles. The equity component of the hybrid funds tries to take higher risks to take risk adjusted returns whereas the debt component tries to protect the portfolio from market volatility and otherwise generates stable returns.

Investors can start a SIP in hybrid funds

One of the easiest ways to invest small sums for a longer duration with hybrid funds is via a Systematic Investment Plan. SIP is a simple and effective way to ensure that you are able to save enough at regular intervals and eventually be able to build a solid corpus. SIPs are highly flexible in nature which means the investor can decide the monthly investment SIP sum and then continue to invest this amount in the hybrid fund every month on a fixed date. Investors who aren’t sure about how much they must be investing in for long term wealth creation can also use the SIP calculator, a free online tool that any layman can use.

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Finance

SIP calculator: How much you need to invest every month to accumulate Rs 5 crore in 15 years

Wealth creation over the long term is not a simple task. You have to ensure that you continue to invest till your investment objective is accomplished. Continuing an investment journey for 10 years or longer can become difficult especially because during this time life may throw unforeseen exigencies upon us and we might have to either quit midway or temporarily put our investments on hold. However, to ensure that you continue your investment journey by investing small sums at fixed intervals you can consider starting a Systematic Investment Plan in mutual funds.

What is a Systematic Investment Plan?

A Systematic Investment Plan or SIP is an easy and disciplined way to invest, especially if you have a long term investment horizon. This way of investing is known to bring in the discipline for someone who is new and isn’t sure about how to remain invested for longer durations. All an investor has to do is decide which mutual fund to invest in and then decide the monthly SIP sum. After this, the investor has to decide whether he wants to invest in mutual funds via SIP weekly, monthly, quarterly, biannually, or yearly. After this, they can either make the SIP investments manually or automate their transactions post which every month on a fixed date, the predetermined sum will be debited from the investor’s savings account and they can buy units depending on the current mutual fund NAV (net asset value).

When you are investing for a long duration it is obvious that you would want to know how much your investments can potentially fetch in the long run. To find that out, you can use the SIP calculator.

What is a SIP calculator?

The online SIP calculator is a free tool that any layman can use. There are two unique ways in which the SIP calculator works and hence can help investors simply financial planning and help them is creating a foolproof investment strategy. All an investor has to do is put in a few details and within no time the SIP calculator computes all the intricate calculations and comes up with close to real numbers. Yes, these are just accurate numbers since the SIP calculator does not take certain factors such as mutual fund expense ratio or exit load into consideration while computing results

I want to build a corpus of Rs 5 crores in 15 years. How can the SIP calculator help me?

The online SIP calculator is a time saving tool as it computes complex calculations in just a few seconds which an average human might take a very long time to calculate manually using a pen and paper. So if your goal is to build a corpus worth Rs 5 crores in the next 15 years, you can use the SIP calculator to determine how much you monthly SIP investments should be so that at the end of your time horizon you have accumulated the desired corpus.

In the SIP calculator, enter –

  • Total wealth you want to earn – Rs 5 crores
  • Time horizon – 15 years
  • Expected mutual fund rate of return (Let us assume 10%)

The SIP calculator will display the following results –

  • Monthly SIP investment amount needed – Rs 1.2 lakhs
  • Total invested sum – Rs 2.16 crores
  • Total wealth created – Rs. 5. 01 crores

Thus, if you wish to build a corpus of Rs 5 crores in 15 years then you will have to start a monthly SIP of Rs. 1.2 lakhs to achieve the financial goal.

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Finance

6 things to know about SIP

Introduction

SIP stands for Systematic Investment Plans. It is a kind of mutual fund which allows you to invest a specific amount, that is pre-planned, on a regular basis at different intervals. It is quite a convenient and flexible form of investment wherein you don’t have to spend any extra amount than whatever is specified. Let’s have a look at a few things that you should know about SIP.

  • SIP returns are taxable or not-

A majority of the investors choose SIP because it is considered a great tool to save taxes. However, it depends upon the type of your mutual fund and the period of redemption as well. If you invest in equity mutual funds, its returns have no tax on them if you redeem the investment after a year. On the other hand, debt mutual funds are taxable and the rate is 20 per cent along with indexation benefit if redeemed after 3 years of investment.

  • How to choose a SIP-

The choice of investment varies and depends upon your particular requirements. You can invest in small and mid cap mutual funds if you do not mind the market risks. If you can bear risks to some extent then you should opt for large cap mutual funds. On the other hand, if you are someone who cannot handle risks or have low risk tolerance then you should go for debt mutual funds. You can also use different online calculators to determine the numbers such as SIP with annual increase calculator will help you find out the yearly increase for your investment.

  • SIP is a safe tool-

SIP is a great investment tool that is very much safe as compared to other tools. When you invest in a SIP, you do not need to spend a hefty amount. You can start by investing small amounts every month. Taking into consideration the longer period of investment, the invested sum is generally the average of high and low. Thus, there is no chance of paying a high amount for mutual funds.

  • What is NAV in SIP-

NAV stands for net asset value. Since the amount of investment in SIP is pre-planned, investors buy more units when the net asset value is comparatively lower and vice versa. So, if the mutual fund NAV of any scheme is Rs. 10, you will have to pay the same amount to buy a unit of the scheme.

  • Save taxes-

If you invest in tax saving ELSS mutual funds via SIP, you will be able to claim tax deductions of up to Rs. 1.5 lakhs according to section 80C of the Income Tax Act. If you invest more than Rs. 1.5 lakhs, you will not get any additional tax-related benefits. This does not mean you cannot invest any further than the specified amount.

  • Lock-in period-

There is no lock-in period if you decide to invest in an open-ended mutual fund through SIP. However, there are a few mutual funds that have a lock-in period too. For instance, the lock-in period for ELSS mutual funds is e years. Any mutual fund that has a lock in period is known as a close ended mutual fund.

Conclusion

Systematic Investment Plans are one of the most popular forms of investment. Investors seem to like it very much because of all the features that it offers. There is less risk involved in this type of investment and you don’t need to invest a big amount to get started with it. This can be the perfect way of investment if you are someone who is just starting out.

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