What are the Benefits of a One Time Mandate in SIP?

What is OTM (One Time Mandate)?

A One Time Mandate (OTM) is a one-time registration procedure wherein you give the bank instruction to periodically take a specific sum out of your savings account and credit it to your SIP portfolio. Once your OTM registration is complete, you won’t need to bother about periodically transferring money because it will all be automated.

Selecting OTM will guarantee that you don’t lose out on monthly contributions to the SIP portfolio. The following is a list of benefits for selecting OTM:

Why should you choose OTM?

• All you have to do is register for the service once. The automatic money transfer process will run on a regular basis.
• easy registration procedures.
• There is very little possibility of a payment failure because the money transfer will be done securely.
• There is no limit to how many SIPs you can register under one OTM. However, ensure that the total value of all SIPs remains well within the designated boundaries.
• Automating money transfers will help you become more disciplined in reaching your objectives.

One-Time Mandate for SIP Mutual Funds: Why It’s a Great Option

Mutual funds are gaining popularity at an unprecedented pace. When discussing mutual fund investment, investors often pose these two options – lumpsum or SIP. While SIP has emerged as a go-to option for most investors, it offers even more convenience and flexibility when combined with a One-time mandate.

For those with long-term financial goals, a one-time mandate can simplify your investment journey. But what exactly is SIP, the full form of OTM, and why should a one-time mandate be your investing method for SIP? Find out with Koshex!

What is SIP?

Systematic Investment Plan, popularly called SIP, is a method of investing in mutual funds where you contribute a fixed amount at regular intervals, usually monthly. SIP investment mitigates the impact of market volatility through rupee cost averaging. This makes it an attractive option for long-term wealth creation.

Benefits of SIP Investment

Before we discuss the specifics of the OTM in mutual funds, you need to understand the advantages of SIP investment that make it a popular choice for investors. These include:

1) Rupee Cost Averaging

With SIP, you can buy more units when prices are low and fewer units when prices are high. This method effectively averages out your investment cost over time and wards off any negative effects of market volatility.

2) Disciplined Investing

SIP investment involves investing a fixed amount each month. This instills financial discipline by encouraging regular investments, irrespective of market conditions. It also prevents you from making impulsive decisions motivated by short-term market fluctuations.

3) Compounding Benefits

Mutual funds are popular for their compounding benefits. SIP harnesses the power of compounding, where the returns generated on your capital invested further contribute to wealth accumulation.

4) Flexibility

While SIP requires discipline, it is quite flexible. You can start with small amounts and gradually increase your investment as your financial situation improves. It also allows you to reduce your investment amount if required.

Different Ways to Invest Through SIP

You can make an SIP investment in your determined scheme through any of the following methods:

• Electronic Clearing Service (ECS): This method automatically debits the SIP amount from your bank account on a specified date.
• Post-Dated Cheques: You can provide post-dated cheques corresponding to each SIP installment. But this can cause inconvenience in case you are planning a long-term investment.
• Online Payment: Many fund houses and distributors provide online platforms for investors to make SIP payments. Here, you need to pay manually on each installment date.

What are the Benefits of One-Time Mandate in SIP?

Before learning about the advantages of OTM, let’s understand what OTM is. A one-time mandate in SIP refers to the authorization that you can give to the fund house to deduct SIP amounts automatically from your bank account without requiring individual instructions for each installment. The benefits of OTM in mutual funds include:

• Convenience: With a one-time mandate, you can eliminate the hassle of repeated manual investments or online instructions for each SIP installment. This streamlines the investment process and reduces administrative hassle.
• Ensures Regular Investments: The mandate ensures that the SIP installment is deducted automatically from your bank account. This promotes regular and consistent investments. Regularity and consistency in investment are crucial for reaping the full benefits of SIP, especially in terms of rupee cost averaging.
• Reduced Chance of Default: Automated deductions reduce the likelihood of missing SIP payments due to oversight or other commitments. You just need to ensure an adequate balance in your bank account. This ensures that you stay committed to your financial goals.
• Time-saving: You can save time by avoiding the need to initiate payments manually. This allows you to focus on other aspects of your financial planning instead of keeping reminders and going through the hassle of paying your SIP investment each month.

What Happens If You Skip An SIP Payment?

Paying your SIP installments manually each month raises the chances of skipping SIPs manifold. Skipping SIP payments can have several implications, including:

• Disruption in Compounding: Consistency is key to fully benefiting from the wonders of compounding. Skipping SIP investments interrupts this process and reduces the overall returns.
• Impact on Financial Goals: Each installment is crucial and a step forward towards achieving your financial goals. Missing SIP payments can affect the timely achievement of your financial goals. Consistent investments contribute significantly to the growth of your investment portfolio.
• Penal Charges: You need to ensure that you have an adequate bank balance on the SIP date. If you skip the SIP installment after it is presented to the bank, then your bank may levy penal charges for bouncing the SIP payment.

In a Nutshell

A one-time mandate in mutual funds allows you to stay committed to your financial goals without any hassle. It assists in maintaining discipline and consistency, which are crucial for long-term wealth creation. Considering the benefits offered by the one-time mandate for SIP investment, you should go for this method to stay consistent and on top of your investment. Nothing can be more satisfying than achieving your investment goals on or before time.  

Choosing the right investment platform plays an equally important role in your investment journey. Koshex is an ideal investment platform that allows you to choose from 5000+ different mutual funds while delivering a seamless investing experience. In case you wish to diversify your investment portfolio, you can consider other avenues provided by Koshex like digital gold, smart deposits, or fixed deposits. With the right method and platform, there is no investment goal that you cannot achieve. Sign up now with Koshex!

Frequently Asked Questions

Q: Can I change the SIP amount with a one-time mandate?

A: Yes. SIPs are quite flexible, and you can modify the SIP amount and date easily by submitting a request to the fund house or through the online platform.

Q: Is it possible to cancel a one-time mandate in SIP?

A: Yes. You can cancel or modify the mandate directly from the investment platform or by contacting the fund house.

Q: Are there any additional charges for setting up a one-time mandate?

A: Usually, there are no additional charges for setting up a one-time mandate for SIP investment. It is a service provided by fund houses to enhance your convenience and ensure that you can seamlessly invest, stay consistent, and achieve your investment goals.