A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.
How do I start/stop a SIP? What happens if I lose an installment?
Before making any investment in mutual funds, you must complete a KYC process. This is done through the presentation of certain documents such as proof of identity and proof of address. The process of starting or stopping a SIP is extremely convenient and easy. How to start a SIP is explained in the graphic on the left.
What happens when you skip an installment or two?
SIP is just a convenient investment mode and not a contractual obligation, there is no penalty even if you lose an installment or two. At most, the Mutual Fund Company would stop the SIP, meaning that additional installments would not be debited from your bank account. At the same time, you can always start another SIP, even in the same folio, even after the previous SIP has been stopped. Please keep in mind that this would be treated as a new SIP and therefore it may take some time to set up the SIP again.
