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Important SIP charges that you should be aware of

  • Highlights

  • You have to pay exit load if you withdraw prematurely

  • Exit load and transaction fees are one-time charges

  • The transaction fee is deducted in 4 instalments

  • You pay on-going expenses on the fund’s daily net assets

An SIP or a Systematic Investment Plan is a great investment option that allows you to invest in market securities in a safe and disciplined manner. You earnings from SIPs are likely to be high, as the interest rate ranges between 12% and 15%, and can even go up to around 21%. Since SIPs allow you to invest small amounts on a regular basis, they also offer you more flexibility and are ideal for conservative investors too. However, there are still certain charges that you have to pay over and above your investment amount.

Take a look at what these charges are.

Exit load

SIPs are a popular invest option largely because they offer high liquidity, along with high returns. This means that you can withdraw from your SIP as and when you wish to. However, when you liquidate your SIPs, you need to pay a charge known as an exit load. This charge is a one-time fee and is expressed as a percentage of your total gains from the SIP. You only have to pay this charge if you exit the SIP prematurely. This means withdrawing from the SIP before the lapse of the holding period that has been defined by the fund house.

Transaction charges

This is another one-time fee that you need to pay if your investment in SIPs is over Rs.10,000 at any given time. This charge amounts to Rs.100 and is deducted in four consecutive instalments. You have to pay transaction charges along with your 2nd, 3rd, 4th and 5th instalments.

5 Reasons why you should invest in SIPs

Recurring charges or on-going expenses

As the name suggests, these aren’t one-time charges. In fact, you have to pay recurring charges or on-going expenses on the Daily Net Assets of your mutual fund. It is important to note that the regulator outlines the extent to which these charges are to be levied, and your fund house can’t charge you more than the specified amount. The expenses are deducted from the net assets of the funds, after which the NAV is posted.

Understanding these three charges gives you a better idea of the total cost of investing in SIPs and allows you to compare it with the returns that you may accrue. Besides, it also helps you understand how transparent and minimal the charges associated with an SIP are, unlike several other options, such as ULIPs that bear multiple, complicated charges. Most importantly, with clarity regarding the charges that accompany an SIP, you will be able to understand whether or not this is an ideal investment option for you in terms of affordability. Moreover, it will also allow help you identify an investment amount that suits your needs.

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All you need to know about selecting the best SIP


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