Systematic Investment Plan (SIP)
Individual investors have often found themselves standing at crossroads when it comes to investing in equity markets; more so, when the markets have been exhibiting an extremely volatile trend. Increasing awareness and growing participation of individual investors in mutual funds have brought into limelight the concept of Systematic Investment Plan (SIP) from some time. Being a disciplined approach of investment, SIP has encouraged individual investors to invest periodically and therefore smoothen out the ups and downs of the market.
An SIP is a specific amount, invested for a continuous period at regular intervals. It is similar to a regular saving scheme like a recurring deposit. It allows the investor to buy units as per a pre decided frequency; the investor decides the amount and also the scheme. SIPs bring discipline to your investments.
Best SIP Plans to Invest in India
Subscribe to SIP
The power of compounding enables you to earn income on income
Monthly investment of Rs 2500
BENEFITS OF SIP INVESTMENT
Allows the investors to invest small amount of money each month without any hassles.
Investing constant amount periodically entails to maximum gains in the long term.
SIPs avoid the risk of timing the markets and facilitate wealth creation in a disciplined manner. Small savings create a big corpus for the future.
Power of Compounding
An investor starting out early can earn much higher returns than one starting out late even with a slightly higher corpus due to the power of compounding.
Hedge your investments against inflation by investing in SIP.
SIP allows investors to invest the same amount each month irrespective of the market cycle, be it a bull phase or a bear phase.
Karvy serves as your investment partner in providing you with research backed recommendations.
Efficient and skilled professionals guide you in taking the right investment move.
Calculate Returns on Your SIP INVESTMENTP
FAQS - Systematic Investment Plan (SIP)
+I have invested in post office schemes and bank deposits, as I am comfortable with these avenues. My relationship manager is asking me to invest in SIP of equity funds. Is SIP suitable for me?
It is true that equity funds are more risky than post office schemes and bank deposits. However, one need to appreciate the fact that SIP reduces the volatility associated with equities as one does not enter into the market in one go. By avoiding equities, you can avoid the risk of volatility at the cost of lower rate of wealth creation. Consider the growth of value of Rs.5,000 per month over a period of 5 years in the table below. The wealth accumulated under SIP in Nifty is almost double than that under other avenues. If a 5-year period results in so much of difference imagine how much difference it can make to the growth of your savings over a period of say 10 or 20 years.
Investment avenue Rate of return Investment value of Rs.5000 per month after 5 years PPF 8.00% Rs. 3,67,069.89 Post Office Recurring Deposit 7.50% (compounded quarterly) Rs. 3,64,448.61 SBI Recurring Deposit 8.00%* Rs. 3,67,069.89 SIP in HDFC Balanced Fund 16.66%** Rs. 4,49,258.07
** XIRR if SIP is done on 5th of every month.
You should also consider the point that if one stays invested with equities for long-term; the risk of losing money reduces. There is no doubt that Indian economy is expected to outperform all its peers in the next few years and as a result Indian Markets are also expected to have a great run. This means that one should expose himself to Indian equities through SIP.
+Should aggressive equity funds like sector or thematic funds be considered for SIP or investment in relatively conservative equity funds like diversified or largecap funds would be better?
For SIP investment, both types of funds i.e. more aggressive funds (like thematic/midcap) and less aggressive funds (like diversified/largecap) could be considered. However, the key factor here is investment duration. If your investment duration is say, 3 years, then a less aggressive fund would be more suitable. However, if the investment horizon is 5 years or so, funds which are high on aggression could be preferred. Hence higher the aggression of the fund; more should be the investment duration.
+There are also talks to daily SIP being more favourable than monthly SIP. As per your opinion, which method is more beneficial?
Daily SIP plan is being offered in the market by multiple AMCs, which allows an investor to invest a pre-fixed amount (as indicated by the investor) on a daily basis in equity funds. There are also daily STPs which allows an investor to invest a lump sum amount in a liquid scheme and later into an equity scheme. On daily basis, amount specified by the investor is transferred to equity scheme of the same AMC. Daily STP helps in capturing daily movements of the market, unlike regular SIPs where investments are made on a monthly basis. However, past data suggests that the difference in returns between these two modes is quite negligible in most cases. Hence, it cannot be said that daily SIP has beat monthly SIP. You can choose the method which suits you the most
+Recommended schemes which could be considered for SIP
Scheme Name Category NAV Returns(%) 2 Years 3 Years 5 Years Birla SL Equity Fund(G) Large-cap 552.00 15.98 32.25 18.73 L&T Equity Fund-Reg(G) Large-cap 65.41 12.30 23.72 14.55 SBI BlueChip Fund-Reg(G) Large-cap 31.656 17.02 27.42 19.14 Franklin India Prima Plus Fund(G) Multi-cap 480.86 17.37 28.19 18.29 ICICI Pru Balanced Advantage Fund(G) Balanced 28.47 11.79 19.75 15.36 SBI Magnum MidCap Fund-Reg(G) Mid-cap 68.35 25.99 41.98 25.30
Scheme Name Category NAV Returns(%) 2 Years 3 Years 5 Years Birla SL Frontline Equity Fund(G) Large-cap 179.62 13.49 24.95 17.35 Franklin India Bluechip Fund(G) Large-cap 385.20 12.88 21.80 14.07 L&T India Value Fund-Reg(G) Multi-cap 27.30 20.13 35.64 22.16 Reliance Equity Opportunities Fund(G) Multi-cap 74.18 10.52 25.69 16.67 Mirae Asset Emerging BlueChip-Reg(G) Mid-cap 35.85 26.54 43.45 26.93 UTI Mid Cap Fund(G) Mid-cap 87.95 20.97 43.10 23.50
Scheme Name Category NAV Returns(%) 2 Years 3 Years 5 Years Reliance Growth Fund(G) Large-cap 868.13 15.95 29.07 16.19 Birla SL Pure Value Fund(G) Multi-cap 44.70 18.28 42.80 22.51 Franklin India High Growth Cos Fund(G) Multi-cap 31.17 17.54 32.27 21.94 Birla SL Small & Midcap Fund(G) Mid-cap 29.58 25.67 38.39 20.04 Canara Rob Emerg Eq Fund-Reg(G) Mid-cap 66.87 23.65 43.90 24.86 SBI Magnum MidCap Fund-Reg(G) Mid-cap 68.36 26.00 41.99 25.30
+What is a Mutual Fund?
A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders in Equity Shares, Government Securities, Bonds, Call Money Markets etc., and distributes the profits. In other words, a mutual fund allows an investor to indirectly take a position in a basket of assets.
Why should I choose to invest in a mutual fund?
For retail investors who do not have the time and expertise to analyze and invest in stocks and bonds, mutual funds offer a viable investment alternative. This is because:
- Mutual Funds provide the benefit of cheap access to expensive stocks.
- Mutual funds minimize the risk of investor by diversifying through investing in a basket of assets.
- A team of professional fund managers manages them with in-depth research inputs from investment analysts.
- Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information which individual investors cannot access.
+Can mutual funds be viewed as risk-free investments?
No. Mutual fund investments are not totally risk free. In fact, investing in mutual funds contains the same risk as investing in the markets, the only difference being that due to professional management of funds, the controllable risks are reduced to a great extent.
+What is SIP?
SIP is systematic investment plan, it a way to invest in mutual funds. In SIP on a specified date, a predefined amount is deducted from your bank account and invested in mutual fund scheme selected by the investor.
+Can I stop or cancel my SIP?
Yes you can stop or cancel the SIP. AMCs don’t charge anything for cancellation or stop of SIPs.
+In how many days SIP units are allotted?
It takes t+3 working days for unit allotment.
+Can I save tax on SIP?
You can save tax only on ELSS (Equity linked savings scheme) SIP
+What is the minimum amount for SIP?
One can start an SIP with a minimum of Rs. 500
+Which is the best mode of investment in SIP?
There are 2 ways you can invest in SIP. One is offline another is online. The best way is online, because you can easily track value of your SIP investment at any point and stop, cancel or redeem you SIP with just 1 click.
+Can NRI invest in SIP?
Yes, only USA and Canada residents are restricted by SEBI to invest in SIPs online.
+How much should I invest in SIPs?
It completely depends on your requirement. Always use an SIP calculator to calculate SIP amount.