Systematic Investment Plan (SIP)


Systematic Investment Plan (SIP) is an option where you invest a fixed amount in a mutual fund scheme at regular intervals. For example, you can invest 1,000 in a mutual fund every month. It is a disciplined investment plan and helps reduce propensity to market fluctuations. It is a convenient tool that helps you preserve capital and also render significant wealth creation in the long-run.
SIP investments can help you reach your financial goals by taking advantage of rupee cost averaging, and growing your investments with compounded benefits

Advantage:

SIP has several advantages over one-time investment. Some of the advantages are mentioned below:
  • Disciplined approach to investments
  • Flexibility to invest small amounts every month
  • Benefit from the power of 2 powerful investment strategies
    • Rupee cost averaging – helps counter volatility
    • Power of compounding – small investments create a big kitty over time
  • Convenient and hassle-free mode of investment
  • No need to time the market.


Rupee Cost Averaging

Rupee Cost Averaging is an effective mechanism which helps in eliminating the need to time the market. Under this method, one need not be concerned about when and how much to invest. A fixed sum of money can be invested regularly and over time it averages out the costs. Say, you invest 1,000 a month, and, the price of the selected mutual fund scheme unit is 10 in the first month, you will get 100 units.
In the next month, if the unit price falls to 9, you are allotted 111 units. In the third month, if the price drops further to 8, it can get you 125 units. Thus, by investing 3,000 over three months, you will get 336 units.
On the other hand, had you invested the entire amount in the first month itself, you would have gained just 300 units. In case of SIPs, the average unit cost is about 8.9 as compared to 10 in case of lump sum investments. Thus, SIPs help lower the average unit cost and can buy you more units.

Power of Compounding

You can gain from compounding by reinvesting the money you earn from your investments to earn even more. The earlier you start, the longer your money has the opportunity to compound and enhance your corpus helping you achieve your financial goals

Other Benefits of Systematic Investment Plans

  • Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.
  • Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.
  • Long-Term Gains - Due to rupee-cost averaging and the power of compounding SIPs have the potential to deliver attractive returns over a long investment horizon.
  • Convenience - SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.

  • SIPs have proved to be an ideal mode of investment for retail investors who do not have the resources to pursue active investments

An SIP for every dream OR financial goal.

Systematic Investment Plan (SIP) is a smart financial planning tool that helps you to create wealth, by investing small sums of money every month, over a period of time. Investing at an early stage of life lets you enjoy the benefits of two powerful strategies, rupee cost averaging and the power of compounding.
Mutual Funds bring you the convenience of starting your SIP online! Now start your SIP from convenience of your home with just few clicks.

How SIP works?

SIP is a method of investing a fixed sum, regularly, in a mutual fund scheme. SIP allows one to buy units on a given date each month, so that one can implement a saving plan for themselves. An SIP is generally preferred for an equity scheme and can be started with as small as Rs 500 per month.
The biggest advantage of SIP is that one need not time the market. In timing the market, one can miss the larger rally and may stay out while markets were doing well or may enter at a wrong time when either valuation have peaked or markets are on the verge of declining. Rather than timing the market, investing every month will ensure that one is invested at the high and the low, and make the best out of an opportunity that could be tough to predict in advance. SIPs thus make the volatility in the market work in favour of an investor and help in averaging out the cost called “Rupee Cost Averaging”. For example, with Rs 1000 one can buy 50 units at Rs 20 per unit or 100 units at Rs.10 per unit depending upon whether the market is up or down. Thus, more units are purchased when a schemes’ NAV is low and fewer units when the NAV is high. Hence, when the two cases are taken together, cost is averaged out. The longer the time-frame, the larger are the benefits of averaging.
SIPs also help in availing benefits of compounding. This means the earlier one starts an SIP and longer the investment horizon, the larger the benefits. The reason being, each rupee one invests earns a return, which ends up as more rupees to earn a return, allowing investment to grow at a fast pace. Higher rates of return or longer investment time periods increase the principal amount in geometric proportions. This is the single most important reason for investors to start investing early and keep on investing on a regular basis to achieve the long-term financial goals.