INTRODUCTION
Mutual funds are one of the most popular investment options for those who want to grow their wealth over time. They offer a diverse range of investment options, from equity to debt, and are managed by experienced professionals who aim to deliver optimal returns to investors. Among the various types of mutual funds, daily SIP mutual funds have gained popularity due to their unique investment strategy.
Daily SIP mutual funds, as the name suggests, allow investors to invest a fixed amount of money daily into their chosen mutual fund. The investment amount can be as low as Rs. 100, making it accessible to investors with small investment capabilities. Unlike regular SIPs, which allow investors to invest monthly or quarterly, daily SIPs provide the opportunity to invest in small amounts regularly, making it easier to build a sizeable investment corpus over time.
One of the biggest advantages of daily SIP mutual funds is that it helps investors to reduce the impact of market volatility. Since the investment amount is spread out over a period, the investor can purchase mutual fund units at different price points. This helps to average out the cost of acquisition of mutual fund units, thereby reducing the risk of investing a large sum at one go.
Another significant advantage of daily SIP mutual funds is the power of compounding. As the investment is made daily, it allows investors to earn returns on a daily basis, which can compound over time. The compounding effect can significantly boost the returns of the investment, making it a great way to build wealth in the long run.
Daily SIP mutual funds also offer the flexibility of investment. Investors can choose to increase or decrease the investment amount as per their financial goals and risk appetite. Additionally, they can also choose to stop or pause the investment at any time, without any penalty.
Investing in daily SIP mutual funds is also simple and convenient. Investors can easily set up a daily SIP through their online investment account, and the investment amount will be automatically deducted from their bank account on a daily basis.
Another advantage of daily SIP mutual funds is that it offers a systematic approach to investing. Regular investments ensure that investors stay invested in the market even during market volatility, helping to avoid emotional investment decisions that can often lead to poor returns.
Investing in daily SIP mutual funds also provides investors with a diversified portfolio. Mutual funds invest in a mix of stocks, bonds, and other assets, spreading the risk across multiple sectors and companies. This diversification helps to reduce the risk of investment loss, making it a safer option compared to investing in individual stocks.
Daily SIP mutual funds also offer tax benefits to investors. Equity-oriented mutual funds have a minimum holding period of one year, after which they qualify for long-term capital gains tax of 10%. Additionally, investors can also avail of tax benefits under Section 80C of the Income Tax Act, 1961, up to a limit of Rs. 1.5 lakh.
However, it is essential to note that mutual funds are subject to market risks, and the returns are not guaranteed. The performance of mutual funds is dependent on the performance of the underlying assets, and hence it is essential to conduct thorough research before investing.
Conclusion
In conclusion, daily SIP mutual funds offer a simple, convenient, and flexible way to invest in the market. With the benefits of market volatility reduction, power of compounding, tax benefits, and a diversified portfolio, it is an attractive investment option for long-term investors. However, investors should evaluate their risk appetite and conduct thorough research before investing.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q.What are daily SIP mutual funds?
Daily SIP mutual funds are a type of mutual fund investment where investors can invest a fixed amount of money daily into their chosen mutual fund.
Q.How much can one invest in daily SIP mutual funds?
The investment amount for daily SIP mutual funds can be as low as Rs. 100, making it accessible to investors with small investment capabilities.
Q.What are the benefits of investing in daily SIP mutual funds?
Daily SIP mutual funds offer benefits such as reducing the impact of market volatility, power of compounding, flexibility, and convenience. Additionally, they provide a diversified portfolio and tax benefits.
Q.Is there a minimum investment period for daily SIP mutual funds?
There is no minimum investment period for daily SIP mutual funds. Investors can choose to stop or pause the investment at any time, without any penalty.
Q.What are the risks associated with daily SIP mutual funds?
Mutual funds are subject to market risks, and the returns are not guaranteed. The performance of mutual funds is dependent on the performance of the underlying assets, and hence it is essential to conduct thorough research before investing.
Q.How can one invest in daily SIP mutual funds?
Investors can easily set up a daily SIP through their online investment account, and the investment amount will be automatically deducted from their bank account on a daily basis.
Q.Can one increase or decrease the investment amount in daily SIP mutual funds?
Yes, investors can choose to increase or decrease the investment amount as per their financial goals and risk appetite.
Q.What is the tax treatment for daily SIP mutual funds?
Equity-oriented mutual funds have a minimum holding period of one year, after which they qualify for long-term capital gains tax of 10%. Additionally, investors can also avail of tax benefits under Section 80C of the Income Tax Act, 1961, up to a limit of Rs. 1.5 lakh.
