A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds. These Investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy. The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments equities, depending upon the scheme's stated objectives. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. There are a wide variety of Mutual Fund schemes that cater to your needs, whatever your age, financial position, risk tolerance and return expectations.
Systematic Investment Plan is more famously known as SIP. Under this plan your investments are staggered ie. you invest a fixed sum of money either monthly or quarterly in a mutual fund. For example, you commit to invest a pre-specified amount (Rs 500 onwards) every month or every quarter in a mutual fund. You fix a date on which every month or every quarter the amount gets invested. The first investment has to be by a cheque and then you can either give post dated cheques (PDCs) or opt for electronic clearing system (ECS). In ECS you give permission for the amount to be directly deducted from your bank account on the fixed due date. The units are allocated as per the then prevailing NAV on that day of the month. You get more number of units if the NAV is low and vice versa if the NAV is high.
Whether as the foundation of your investment programmed or as a supplement, Mutual Fund Schemes can help you meet your financial goals.