Indian equity investors were introduced to systematic investment plans (SIPs) 15 years ago. Franklin Templeton India Asset Management (India) Ltd was the first fund house to popularize it in the Indian mutual find industry. In 1996, when the fund house launched its Templeton India Growth Fund, it also launched an SIP that enabled investors to invest a fixed sum in it, every month. Over the years, all fund houses started to offer SIPs in all their equity funds. Earlier, fund houses used to mandate 12 post-dated cheques from investors. When electronic clearing system (ECS) facility started, fund houses started taking bank mandates from investors. At present, most fund houses discourage post-dated cheques, and insist only direct debit. Besides monthly investments, you can also do other things with your SIP.
Top up your sip...
Say you are a salaried employee and have an ongoing SIP. If you get a hike and wish to invest more every month, you need to start an additional SIP. Some fund houses, including ICICI Prudential AMC and Birla Sun Life AMC, now allow you to top up existing SIPs. All you have to do is fill up a form and indicate to your fund house how much you want to add to your existing SIP instalment. Birla Sun Life AMC allows you to top up either on a half-yearly or yearly basis.
...or pause it temporarily
Sometimes, when we foresee a major expense coming up and our budgets get restrained, we would like to bring a pause in our SIP. Usually, the way to do this is to stop your ongoing SIP and then start a new SIP later. But starting an SIP afresh means filling out a form, giving a cancelled cheque for a bank mandate and then having to wait for a month to a month-and-a-half for it to start. Fund houses such as ICICI Prudential AMC now offer a facility called “SIP pause”, wherein you can pause an SIP up to three months. You need to choose the number of months that you’d like your SIP to pause at the time of giving your pause application. You can submit your SIP pause application two working days before your SIP date. ICICI Prudential AMC allows investors to pause an SIP only once in a folio.
Fund houses including Kotak Mahindra AMC, Birla Sun Life AMC and Reliance AMC offer insurance along with SIP programmes. Investors can opt in or out of such schemes. There are other SIP programmes, offered not only by some fund houses but also by online MF platforms, that allow you to change your amount, depending on a certain formula, that you put in an SIP programme every month. This feature or product is called value or flexi SIP.
Before you start an SIP, ask your distributor or financial planner about these features.