Ever since Franklin Templeton in 1998 introduced the concept 'Systematic Investment Plan' in its portfolio of schemes for mutual funds investors it has caught on the imagination of the investors all over the country. The particular class of investors who are to some extent, risk-averse in shares investments or who suffered heavily in terms of money by over-relying on the so-called online tips with a short and medium term horizon, turn to this form of investments. SIP requires investments in a graduated manner in a scheme over a period of time. As the Net Asset value of equity-oriented schemes are influenced and guided by the daily movement of the their underlying stocks in the portfolio of the respective schemes, entering at the regular dips which the current share market has recording, makes greater sense. This greatly benefits the class of investors who are not in favour of direct investment in stock market.
There are fund houses who float these SIP schemes which allow periodic investment for the subscribers to these schemes. It is possible to earmark a part of one's investible funds for regular investment on a monthly or quarterly basis. The principal advantage of this form of investment is that the average return on SIP funds is higher than the investment made in a lump sum. And studies in this regard confirm the veracity in it. As we are aware that the return equity-linked investments in mutual fund schemes is exempted from capital gains tax under the Income Tax act, the return is higher taking into the exemption factor.
There is another development in this regard which is likely to make investment in SIP schemes all the more attractive. Now it is possible to take full advantage of the daily fluctuations in the values of NAV. A SIP investor can stagger his share of investments on a daily basis and gain significantly out of his investments. A few Asset management Companies have already come out with such schemes and these are worth considering.