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Systematic Investment Plan |
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What is Systematic Investment Plan
Systematic Investment Plan (SIP) is a disciplined way of investing, where you invest, fixed amounts at a regular frequency. You often decided to start saving and investing regularly,but get caught in your day to day activities and forget investments. SIP, the time tested investment approach helps bring in the much needed disipline, and shown good results the world over. |
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How dose a SIP work
- Decide the amount to be invested per month
- Choose a scheme
- Issue cheque for 1st installment
- Future installment will be debited from your BankAccount
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What's special about SIP?
In addition to getting you into the habit of saving regularly, SIP puts two powerful forces to work for you.
| Month |
Amount you invest |
NAV |
No. of units |
| 1 |
Rs. 1000 |
Rs. 10 |
100.000 |
| 2 |
Rs. 1000 |
Rs. 12 |
083.333 |
| 3 |
Rs. 1000 |
Rs. 10 |
100.000 |
| 4 |
Rs. 1000 |
Rs. 8 |
125.000 |
| 5 |
Rs. 1000 |
Rs. 10 |
100.000 |
| Total |
Rs. 5000 |
Rs. 50 |
508.333 |
The average NAV = 50/5 = Rs. 10.00
Your average price = Your total investment / Total no. of units
= 5000 / 508.333 = Rs. 9.84
What you see from the table above is the fascinating aspect of Rupee Cost Averaging. It makes you busy fewer units when the price is high and more units when the price is low, thereby bringing down your average cost. Moreover, this gives you the same discipline as investment professionals. While Rupee Cost Averaging does not assure you of a profit, it is known to have worked well for millions of investors throughout the world.
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Small Investments Mega Returns
INVESTORS WHOINVESTED Rs. 10,000 EVERY MONTH IN THE
FOLLOWING SCHEMES WOULD HAVE REAPED THESES RETURNS
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| Scheme Growth |
Nav * |
Value * |
Yield * |
| Reliance Growth |
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| Reliance Growth |
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| Kotak 30 |
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| DSP Merrill Lynch |
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| Franklin India Opportunity Fund |
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SIP Start date: 1st December 2002 SIP End Date: 1st November 2007.
Total Investments: 6,00,000 Vav & Value as on ; 1st November 2007. |
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Advantages of SIP
An SIP helps you reach your financial goals by investing a fixed sum monthly / quarterly, in your chosen fund, for a pre-determined number of periods. So that you -
- Average out on market fluctuations (no need to time the market).
- Get investment discipline, helping you invest for and reach your future goals.
- Invest disposable funds – that might otherwise lie in Savings accounts, earning low interest and letting inflation eat into them.
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