What is AMC SIP: How it Works?

Did you know that smart investors are moving towards AMC SIPs and potentially earning more by cutting out brokers, reducing hidden charges and taking full control of their investments?

But here’s the real question: "What makes AMC SIPs a better choice for long-term investors compared to regular SIPs?

Moreover, an AMC SIP allows you to invest a fixed amount regularly, monthly or quarterly, directly with the AMC like HDFC Mutual Fund, ICICI Prudential or SBI Mutual Fund, without shareholders and brokers, with lower expense ratios.

What is AMC SIP in Mutual Funds?

To put it simply, an AMC SIP in Mutual Funds starts directly with the Asset Management Company (AMC), like HDFC Mutual Fund, ICICI Prudential Mutual Fund or SBI Mutual Fund, without involving brokers or third-party investment platforms. The AMC invests a fixed amount at regular intervals into your chosen MF scheme, helping you build your portfolio systematically.

In order to start an AMC SIP, you must go directly to the AMC's website or app, select your fund scheme, select the amount of each instalment and allow your bank to take out money via auto-debit.

The core meaning of AMC SIP is that you invest directly with the AMC, without involving brokers or shareholders, which invests in the direct plan of mutual funds, which means lower expense ratios because there’s no commission to intermediaries.

Your SIP amount is debited automatically on the selected date & you receive mutual fund units at that day’s Net Asset Value (NAV).

Don't Miss: What is the difference between SIP and Mutual Fund?

After understanding what AMC SIP means, let’s look at a practical example to know how it works.

How does AMC SIP Work with an Example

Let's understand AMC SIPs with a practical step-by-step example:

Suppose Kunal wants to invest in the HDFC Balanced Advantage Fund:

1. He first visits the HDFC AMC website or app.
2. Completes KYC if not already done, like using PAN, Aadhaar, etc.
3. Chooses the fund scheme, sets an SIP amount of Rs 2,000 & selects the investment frequency as monthly.
4. Selects a SIP date, like the 10th of every month.
5. Authorizes his bank via the National Automated Clearing House (NACH)for auto-debit.

So now, on the 10th of each month, Rs 2,000 is debited & invested directly in the scheme. Kunal receives MF units at the current Net Asset Value (NAV). With time, this disciplined approach helps build his investment portfolio.

* The same process works with other AMCs like ICICI Prudential Mutual Fund, SBI Mutual Fund, or Mirae Asset Mutual Fund & direct AMC SIPs have lower expense ratios due to no distributor commission.

Pro Tip: Know your future returns using the SIP Calculator in 3 easy steps. 

Connect with the best financial expert for personalized advice.

Now, In the next heading discuss the benefits of AMC SIP in the next headline.

Benefits of Investing in AMC SIP

Investing in AMC SIPs provides major benefits. Here is how:

1. Lower Expense Ratios: Investing directly through the AMC usually means you are picking the direct plan of a mutual fund without a broker or distributor involved, which helps you save on expense ratios to get better long-term returns.
2. Better Transparency: When you invest directly with the AMC for SIP, you get a clear image & information of your MF investments, expense ratios & portfolio holdings.
3. Higher Returns Over Time: Even a small difference in expense ratios can compound into better gains over the long term. That is why direct AMC SIPs may perform slightly better than normal SIPs.
4. Direct Relationship with the Fund House: By setting up an AMC SIP, you deal clearly with the fund house, which makes communication and solving doubts faster and easier.
5. Easy Tracking and Management: AMC SIPs provide you access to the AMC’s online portal and mobile apps, making it accessible to track your portfolio, download account statements & even make changes in SIP details.
6. Disciplined Investing: Like all SIPs, this AMC SIP builds discipline and consistency in the investment journey. Regular instalments help through rupee-cost averaging & reduce the impact of market volatility and trends.

Also Read: Top 5 AMCs in India for Mutual Fund Investments.

Now, let's explore the comparison between AMC SIPs & SIP.

Difference Between AMC SIPs vs SIP

The table below highlights the key differences between an AMC SIP and regular SIPS:

Pro Tip:  Use an SWP Calculator to visualize your investment growth and set goals. 

Now, moving further with the important headline, how AMC invests in SIPs.

How do AMCs Invest in SIPs?

When you set up a SIP with an Asset Management Company, the process is simple but highly structured:

1. Auto-debit of your SIP amount
   

   On the specific chosen SIP date, the AMC starts an auto-debit instruction via NACH or ECS to your bank account.

2. Picks Investor Funds
   

   The AMC picks money from thousands of investors who have invested in the same mutual fund scheme.

3. Professional fund management
   

   The fund corpus is managed by expert managers, who use their expertise & approach in a diversified mix of assets, equities, bonds or other securities based on your investment goal.

4. Allocation of units
   

   Based on the day’s Net Asset Value (NAV), the AMC allocates mutual fund units to your folio. This ensures transparency, as you know exactly how much you have purchased.

5. Portfolio Tracking
   

   Fund managers actively track market trends, rebalance the portfolio & make strategic investment decisions to get compounding returns.

6. Missed instalments
   

   If you do not have enough money in your account for an SIP instalment in such cases, the SIP usually gets skipped for that month, but consistent defaults can lead to cancellation of the SIP approval by the AMC.

Start investing today with a small amount by SIP or AMC SIPs.

The next headline helps you decide which option best fits your investment goals.

Which is Better- AMC SIP or SIP?

Here are the points that help you decide which one is better:

Check the different plans that help you get bigger returns with smart investments.

1. Cost-effectiveness

• AMC SIP: Lower expense ratios due to no broker commissions with the direct plan. This can provide higher returns in the long term.
• Regular SIP: This has higher costs due to commission by the broker, which can reduce the compounding long-term return.

2. Transparency & Control

• AMC SIP: Direct control to the AMC that gives investors visibility about the MF portfolios, expense ratios & fund schemes.
• Regular SIP: It provides less visibility & depends on the broker’s platformfor any updates.

3. Advisor Support

• AMC SIPs: It is the best for confident & self-directed investors who do not need support.
• Regular SIP: Gives advisor support, so it is ideal for beginners or investors who want expert help with investment decisions.

4. Convenience

• AMC SIP: In this, an investor can manage investments across multiple fund houses separately, though most AMCs now offer user-friendly apps and websites.
• Regular SIP: Brokers provide smart dashboards to track all your SIP details in one place, which can be more convenient.

5. Flexibility

• AMC SIP: Retail investors can pause or cancel it anytime through the AMC's website, app or by contacting the fund house directly.
• Regular SIP: You can cancel or change the details, but you require a broker or advisor.

Conclusion

To wrap up, an AMC SIP can help you make better mutual fund investment decisions by investing directly with the AMC. You get lower expense ratios, better transparency & complete control over your portfolio.

However, AMC SIPs are ideal for investors who are confident about their investment goals & able to manage their fund schemes without support. Investors should stay disciplined with their investments, monitor their MF portfolio & use tools like an SIP calculator to plan effectively.

Remember, before investing in SIPs, check your risk capacity and long-term financial goals.

Frequently Asked Questions

1. Can I stop an AMC SIP?

An investor can easily stop or pause an AMC SIP anytime by raising a cancellation request through the AMC’s website or by contacting the fund house directly.

2. What happens if there is an insufficient balance for an SIP instalment?

In this case, the SIP instalment is skipped for that month, but repeated defaults can lead to cancellation of your SIP.

3. Can I withdraw money from an AMC SIP?

Yes, you can redeem your mutual fund units from an AMC SIP at any time. The money will be credited to your demat account within a few working days.

4. Is investing in AMC SIP safe?

AMC SIPs are regulated by SEBI and AMFI, making them a safe & transparent way to invest in mutual funds.

5. What is the lock-in period for AMC SIPs?

Most AMC SIPs do not have a lock-in period. But tax-saving schemes like ELSS mutual funds have a mandatory 3-year lock-in on each SIP instalment.

6. How do I change my SIP date or amount in an AMC SIP?

You can change the SIP date, frequency or instalment amount by logging into the AMC’s website or app & submitting a modification request.