There are various financial instruments in the market that can generate lucrative returns. Mutual funds are one of the most sought-after and popular investment options.
These mutual funds pool funds from investors and invest in a basket of stocks and other financial securities with different goals, such as capital preservation and wealth creation.
They are managed directly by Asset Management Companies (AMCs) who offer investors SIP (Systematic Investment Plan) and a lump sum route to invest.
In this article, we will cover what is AMC SIP in mutual funds and how it can be advantageous to you.
What is an Asset Management Company (AMC)?
Before learning everything about AMC SIP mutual funds, let’s first look at what precisely an AMC is.
AMCs are firms or entities that are registered under SEBI, and these companies issue and manage mutual funds with different goals.
Based on the various financial objectives, an AMC assembles a collection of stocks, government bonds and other financial securities in different proportions.
After setting up the funds, AMCs appoint fund managers who then actively manage these different mutual fund schemes. These fund managers are professionals and experts with extensive knowledge of the markets.
In addition, these AMCs employ research analysts and other specialists to aid fund managers in making strategic financial decisions.
AMC SIP mutual funds are a class of mutual funds that a particular asset management company directly manages.
The primary goal of AMC SIP is to offer investors a systematic approach to investing in funds with a ticket size of as little as Rs. 500. This helps even small or beginner investors to plan for their financial future and earn compounding returns.
Benefits of AMC SIP Mutual Funds
AMC SIP mutual funds offer various advantages over traditional mutual funds; check out these advantages below.
- Active Fund Management
Designated fund managers actively manage AMC SIP mutual funds. They regularly review and adjust your portfolio to take advantage of market opportunities.
Because your portfolio composition is continuously revised, these funds generate higher returns than traditional mutual funds.
Therefore, these funds are especially beneficial for people who do not have much market knowledge or lack the time required to research and invest regularly.
- Diversification
Asset management companies offer an extensive range of SIP schemes that cater to different financial objectives and risk profiles.
Additionally, your funds are invested in various asset classes such as equity, debt, and hybrid, which helps spread the risk and stabilise the returns.
- Convenience and accessibility
AMCs provide access to mutual fund investments through online platforms and allow individuals to invest as low as Rs. 500, making it very convenient for people to either set up SIPs and increase the funds over the years or simply invest a lump sum amount.
- Real-time Updates
AMCs provide the net asset value in real time, enabling you to monitor your portfolio daily. This way, you can redeem your investments or increase your investment value based on market trends and patterns.
- Liquidity
Many investments often have a maturity period, and you might be penalised for premature withdrawals. However, AMC SIP mutual funds allow you to sell and buy funds at your own convenience, making these stocks highly liquid.
- Professional management
AMC SIP mutual funds are managed by professional managers who have a deep knowledge of various market aspects. They also have sufficient research work and statistical analysis data that helps them to make data-driven decisions.
Since these managers also have access to tools you may not have, they will likely make much more lucrative decisions.
Drawbacks of AMC mutual funds
Like every other investment option, AMC mutual funds also come with certain drawbacks and risks, which are listed below.
Market Risk
Like other mutual funds and investment options, AMC mutual funds are also subject to market risk. If the market experiences a downturn, your fund’s value will decline, potentially leading to losses in your AMC mutual fund investments.
Management Risk
The performance of the AMC mutual funds is totally dependent upon the judgment of the fund manager, and one wrong or poor investment decision can lead to heavy losses.
You need to consider these factors before investing in the AMC SIP of your choice to make an informed decision.
Conclusion
In a nutshell, AMC mutual funds offer several advantages to investors and are one of the best investment options.
Whether your goal is capital preservation or appreciation, these tailor-made schemes can help you achieve all these targets.
However, before investing in these funds, do your ground research and analyze the different schemes and their compositions along with the service fee charges.
Ensure you only make an informed decision after collecting and studying all this data to ace your investment journey!
