The economic growth in India and its financial leadership among the global markets has paved a path for the domestic as well as international investors to exploit the immense investment opportunities in the Indian financial market. To make the things even easier, Indian authorities have introduced a number of investment instruments for investors. Mutual funds and SIPs or Systematic Investment Plan are two very popular modes of investments among the Indian investors to make some good fortunes out of their investment. Both the instruments have their own pros and cons and in no manner either could be treated as good or bad since both are purchased on strict accordance with the buyers’ requirements.
Mutual Funds are raised by the investment companies to accumulate a huge sum of money from investors and outside entities. These companies sell and buy mutual funds on a continuous basis and invest the raised money in securities of different companies to get the good returns. Mutual funds hold the shares of some top notch companies and receive lucrative dividends against them and the earnings are equally distributed among the share holders thereafter. Let’s understand some of the basic facts of the mutual funds:
• Mutual funds can be either or both of open ended and closed ended modes.
• Open-end fund offers to sell its shares continuously to investors.
• Closed end funds have limited number of shares.
Mutual funds usually obtain their overall earning in two ways. They avail it either in the form of the dividend they get on the held securities or by redemption of their shares by investors will at a discount to the current NAVs.
In the contrary, SIP or Systematic Investment Plan works like the recurring deposits where you investment a small amount of money every month. It enables investors to infuse partial money in mutual funds without compromising other financial liabilities. In the very layman language SIP allows a specific amount to be invested with sheer discipline for a continuous period at regular intervals under this plan. Let’s understand some of the basic facts of SIP:
• It is a method of investing a fixed sum regularly in a mutual fund.
• It enables the investor to purchase units on a given date every month.
• It allows investors to participate in the market swings accordingly.
Mutual fund and SIP are the very lucrative investment tools that offer a number of financial benefits to the investors if invested wisely.
