Freedom SIP: What is Freedom SIP, how is it different from normal SIP?

SIP is considered the best way to invest in mutual funds. In this, you keep depositing a fixed amount in the fund at fixed intervals. You can withdraw this money whenever you feel like. Almost everyone will know about common SIP. But do you know about Freedom SIP? If not, then today we will tell you what it is and how to take advantage of it.

Freedom SIP starts after the end of normal SIP. Freedom SIP has two parts. The first part is where you are investing and the second part is where you are withdrawing money systematically. Some time ago, ICICI Prudential Mutual Fund launched Freedom SIP. Since then, Freedom SIP has remained a topic of discussion.

Understand Freedom SIP like this
It has two parts SIP (Systematic Investment Plan) and SWP (Systematic Withdrawal Plan). In a systematic investment plan, you commit to deposit a fixed amount for a fixed period of time. Suppose you chose to invest Rs 10,000 for 8 years. After 8 years, you will have the option to choose the systematic withdrawal plan as per your choice. If you do not do this then the default SWP will be selected for you.

Understand with Example
Taking the example of ICICI Freedom SIP, according to the information available on their website, the default monthly SWP (i.e. the amount received every month) of SIP of Rs 10,000 every month for 8 years will be Rs 10,000. If you increase the tenure by 2 more years to 10 years on an investment of Rs 10,000, then the amount received every month will become Rs 15,000. By investing with this equation for 30 years, you can get Rs 1.20 lakh every month.

Source and target scheme
There is one more important thing that you need to understand regarding your investment in Freedom SIP. When you are investing money in SIP with a pre-fixed period, then the plan in which that money will go will be called the source plan. After SIP ends and SWP starts, this money will be transferred to a new scheme. This scheme will be called the target scheme. If the source and target scheme are the same then Freedom SIP will not work.
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