Systematic Investment Plan (SIP)
A Systematic Investment Plan (SIP) is a method of investment like your recurring deposit that allows you to invest
a fixed sum, regularly, in a mutual fund scheme. SIP allows you to invest pre-determined amount at a regular interval (weekly,
monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and
building wealth for the future.
How does SIP help?
•
•
•
•
•
Helps in rupee cost averaging
Inculcates the habit of disciplined investing
Thrives in volatile market conditions
It is easy on the wallet, as we don’t have to commit large sums of money at one go
Benefits from the Power of compounding
Invest Smartly –
• Adopt a disciplined & long term approach – Invest regularly and systematically
• Start investing as early as possible
• Allow your money to grow – stay invested & do not get distracted with market fluctuations
What is Rupee Cost Averaging
With volatile markets, most investors remain skeptical about the best time to invest and try to 'time' their entry into the market.
Rupee-cost averaging allows you to opt out of the guessing game. Since you are a regular investor, your money fetches more
units when the price is low and lesser when the price is high.
Month
Amount invested
Cost
Units
Month 1
5000
15
333.33
Month 2
5000
17
294.12
Month 3
5000
18
277.78
Month 4
5000
15
333.33
Month 5
5000
13
384.62
Month 6
5000
12
416.67
Total
30000
2039.84
Average cost per
14.71
Instead if Rs. 30000 was invested in Month 1, the investor would have got (30000/15) 2000 units with the cost of unit at 15.
(Above is a hypothetical example for illustrative purpose only)
What is Power of Compounding
Simply put, Compounding refers to the re-investment of income at the same rate of return to constantly grow
the principal amount, year after year. In other words, Compounding is earning “interest on interest”. Staying invested and
contributing regularly can significantly increase your assets over time as your savings grow and the effect accelerates –
a powerful force in a long-term savings strategy
Happy SIPPing!
Average Rate of Return
10%
12%
15%
Invested Amount
5000
5000
5000
End of Year 1
5500
5600
5750
End of Year 3
6655
7025
7604
End of Year 5
8053
8812
10057
End of Year 10
12969
15529
20228