SYSTEMATIC INVESTMENT PLAN ( SIP )
SYSTEMATIC INVESTMENT PLANÂ - SIP -Â AN IDEAL Â SAVING TOOL Â Â
 SYSTEMATIC  INVESTMENT PLAN  - BASICS
   Generally  Systematic Investment Plan ( SIP )  is  referred to investment vehicle  offered by   Mutual Funds  allowing them to invest small  amounts in periodic intervals  instead of single lump sum payment .  (  To know about Mutual Fund  click here  )  . In the scheme a fixed amount of money is paid  by the investors through their standing instruction to their  bank accounts periodically or through ECS  ( Electronic Clearing service  ) and invested in a specified mutual fund. The investor is allocated a number of units  equivalent to the Net asset value on the date of payment . Every time a sum is invested, more units are added to the investors account.  Thus in this strategy ,  an investor  goes on buying  the mutual fund  in regular intervals for  a specific period  at different NAV or price . This strategy has twin advantage. First  one is  , it allows to invest in small amounts  to buy  a desired mutual fund  which helps  small investors , middle class . For  example , a salaried investor can set  standing instruction   on monthly basis  with installments  affordable for him to pay every month .  Over the years  , he may be able to acquire desired amount of the mutual fund .  Second important  advantage is  , he acquires the mutual funds  at different prices  depending up on NAV  at the date of each remittance .  It will help him to average out  his investment cost  by getting more units when markets are low and lesser units when markets are higher . Â
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 MORE INDIANS ARE TAKING SIP ROUTE FOR INVESTMENTÂ
Dated 16.06.2018 : Newspaper report suggests that more and more Indians are  are investing through Systematic Investment Plan  and the amount collected has reached an all time high of Rs 7,304 crores in the month of May 2018 . Monthly collection of SIP has increased over the years from Rs 1,206 crores in March 2014 , to Rs 2,719 crores in March 2016 to Rs 7,304 crores in May 2018 .  Overall SIP collection rose to Rs 67,190 crores in 2017 -18 from Rs 43,921  from the previous year . Â
It is reported that Equity mutual funds and Balance Mutual funds are the preferred investment channel for the investors . Â
One of the reasons attributed to increase in mutual funds is the gradual  decrease of returns in other avenues of  investment like bank deposits , gold and real estate .Â
Dated 16.06.2018 : Newspaper report suggests that more and more Indians are  are investing through Systematic Investment Plan  and the amount collected has reached an all time high of Rs 7,304 crores in the month of May 2018 . Monthly collection of SIP has increased over the years from Rs 1,206 crores in March 2014 , to Rs 2,719 crores in March 2016 to Rs 7,304 crores in May 2018 .  Overall SIP collection rose to Rs 67,190 crores in 2017 -18 from Rs 43,921  from the previous year . Â
It is reported that Equity mutual funds and Balance Mutual funds are the preferred investment channel for the investors . Â
One of the reasons attributed to increase in mutual funds is the gradual  decrease of returns in other avenues of  investment like bank deposits , gold and real estate .Â
Advantges  for  a retail investor .
1. AFFORDABLE : Makes  investment  in mutual funds  affordable for small investors .  One can invest every month  a small portion of his savings for purchase of MF
2. DIVERSIFIED :Such purchase of units in MF  makes your investment diversified  as each mutual fund invests such amount in diversified portfolios.  It is equivalent to purchasing various  stocks, financial instruments in small quantity by investors themselves . For example if  one invests  Rs 1, 000 in  a mutual fund  which invests in 20 large cap stocks ,   a total of Rs 1,000 gets invested  proportionally  in 20 stocks which an ordinary investor can never do  in stock market in such small quantities due to  lot size of investments in each stock .If an investor invests  in 5 mutual funds  and if each mutual fund invests in 20 different stocks ,  it is equivalent to investor  buying 100 stocks  every month .  By choosing mutual funds investing in different  categories of financial instruments  like bonds , stocks or gold etc  , one can make his portfolio well diversified  .Â
3. VOLATILITY PROOF  :  As units are purchased  over  a period in regular intervals , say  a month ,  units are acquired at various prices prevailing on each day of payment ,  short term volatility is  avoided .  Thus cost of  investment gets averaged out .Â
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2. DIVERSIFIED :Such purchase of units in MF  makes your investment diversified  as each mutual fund invests such amount in diversified portfolios.  It is equivalent to purchasing various  stocks, financial instruments in small quantity by investors themselves . For example if  one invests  Rs 1, 000 in  a mutual fund  which invests in 20 large cap stocks ,   a total of Rs 1,000 gets invested  proportionally  in 20 stocks which an ordinary investor can never do  in stock market in such small quantities due to  lot size of investments in each stock .If an investor invests  in 5 mutual funds  and if each mutual fund invests in 20 different stocks ,  it is equivalent to investor  buying 100 stocks  every month .  By choosing mutual funds investing in different  categories of financial instruments  like bonds , stocks or gold etc  , one can make his portfolio well diversified  .Â
3. VOLATILITY PROOF  :  As units are purchased  over  a period in regular intervals , say  a month ,  units are acquired at various prices prevailing on each day of payment ,  short term volatility is  avoided .  Thus cost of  investment gets averaged out .Â
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Risks NOT Â COVEREDÂ Â Â
1. MARKET RISKS  :Mutual Funds carry all the investment risk  of the class of investment  they make in . For example ,   MF investing in equities will carry  risks associated with  investment in equities  while MF investing in Bonds  will carry the investment risks of the Bonds . Hence investment made in MF through SIP will also not escape the associated risks of investment  made by individual  mutual funds .  When purchase price is  averaged out during the period of investment  , MF will be redeemed on maturity at the  price prevailing  then . Hence if markets have fallen at the time of maturity ,  investments made  can not escape from the loss  . Â
2.  EFFICIENCY RISK  :  Mutual funds are managed by fund managers of  issuing company .  Return of investment on MF  depends on the efficiency of the funds manager  apart from market movement .  Hence investment  in MF carry   efficiency of investment risk alsoÂ
3.  PROFESSIONAL CHARGES : Investment also carries professional charges of AMC and investor has to bear the charges irrespective  of the efficiency of the manager . Â
2.  EFFICIENCY RISK  :  Mutual funds are managed by fund managers of  issuing company .  Return of investment on MF  depends on the efficiency of the funds manager  apart from market movement .  Hence investment  in MF carry   efficiency of investment risk alsoÂ
3.  PROFESSIONAL CHARGES : Investment also carries professional charges of AMC and investor has to bear the charges irrespective  of the efficiency of the manager . Â
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UNIFIED Â PAYMENT INTERFACEÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â BHARAT BILL PAYMENT SYSTEMÂ Â Â
     BHIM APP                                                AADHAR Â
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​e-INSURANCE  Account (  eIA  )                                 SWIFT     Â
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 SMALL FINANCE BANKS                                     PAYMENT  BANKS   Â
                                    Â
UNIFIED Â PAYMENT INTERFACEÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â BHARAT BILL PAYMENT SYSTEMÂ Â Â
     BHIM APP                                                AADHAR Â
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​e-INSURANCE  Account (  eIA  )                                 SWIFT     Â
CLICK ON THE SUBJECT TO GO TO THE PAGEÂ
ALTERNATIVES FOR systematic investment plansÂ
A  small  investor has similar  opportunities , like SIP ,  provided to invest his  savings in other investment vehicles by Banks and Insurance companies . Commercial banks  offer Recurring Deposit schemes  ( RD )where in  a customer can open  a  Recurring Deposit account with them , give  a standing instruction them to transfer  a fixed amount  every month  for  a  specified period , say 1 to 5 years .  Depositor would get interest rate  that is paid  on  a Fixed deposit  similar to the period  of investment .  Similarly Life Insurance companies offer schemes of  paying  insurance premium  every month where  subscription cover both Life Insurance and  Long term investment .Â
FOR TAX PLANNINGÂ
 It some times become difficult to invest  all eligible amount to be invested  in one go  for getting tax benefits at the end of the year . So many Mutual Funds offering ELSS  ( Equity linked saving Schemes )  offer  SIP facility for the benefit of  their customers .  ELSS  schemes are eligible for  tax benefits under 80C .  One can utilise such facility for tax saving  and to avoid last minute scramble for funds at the end of the financial year .  To know about the ELSS  Schemes , Go to the  last section of this page .Â
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 ABOUT   Mutual Fund Issuers in IndiaÂ
Mutual Fund issuers are  to be  the members of   Association of  Mutual Funds in India ( AMFI ). One can go to the site of association  AMFI  (www.amfiindia.com) and find details of  the Issuing Company. Click here  for  the list  of mutual fund companies  who operate in India .Â
There are large number of mutual funds available for investment in India . They are issued by many companies with diverse portfolio . It will be difficult for a new investor to select among those which will suit his needs . Even on the face if MFs look good by their goals , strategies and investment models , it is difficult to know how it has translated in to actual investment and the efficiency of the funds manager to harness the benefits . Hence to assist investors , many rating agencies  like CRISIL , Value Research , ICRA rank  individual funds with regard to past performance in comparison with peer funds .    However it must be noted that past performance is no guarantee for future . Further for new funds , investor has to go only with stated objectives and past performance of the funds manger in managing earlier funds .Â
 Click Here   to Read       PLAN N CREATE YOUR OWN  CAPITAL PROTECTED HYBRID FUND      IN EASY WAYS      Â
FOR READING ARTICLE  TAX ON RETIREMENT BENEFITS , CLICK HEREÂ
PRECAUTIONS TO BE TAKEN WHILE INVESTING STOCK MARKETS , CLICK HEREÂ
FINANCIAL PLANNING FOR YOUNG  , CLICK HERE ​   HOW TO LINK AADHAR WITH PAN ?  CLICK HEREÂ
FOR READING ARTICLE  TAX ON RETIREMENT BENEFITS , CLICK HEREÂ
PRECAUTIONS TO BE TAKEN WHILE INVESTING STOCK MARKETS , CLICK HEREÂ
FINANCIAL PLANNING FOR YOUNG  , CLICK HERE ​   HOW TO LINK AADHAR WITH PAN ?  CLICK HEREÂ
Tips  FOR INVESTINGÂ
1  Find out the amount of money you can save every month out of your salary / business   and amount you can pay every month without default .Â
2. Allocate specific percentage  to various categories  of investment options like Recurring Deposit in  a bank , Monthly Insurance premium  you have to pay  . ( Refer our  INVESTMENT page to know various options available  )  While Recurring Deposit plan gives  a fixed income over the years  , Insurance premia  covers Life Risk.Â
4. Invest your allocation to SIP in Mutual funds  in at least 5 to 10 different funds  , each one investing in different segments . You would spread the risk .Â
5. Risk of a  MF is same as the risk of  asset class it has invested . Further they also carry management charges of AMC  which will be taken out from the fund irrespective of  profitability . If  AMC fund managers take  bad decisions ,  risks of the mutual funds may be compounded and it may turn out worse than direct investment .  Hence study the objective and class of  funds it has invested and the track record of the manager before investment .Â
6. Set the maturity period  of each SIP according to your future requirement of funds for your  life goals .Â
2. Allocate specific percentage  to various categories  of investment options like Recurring Deposit in  a bank , Monthly Insurance premium  you have to pay  . ( Refer our  INVESTMENT page to know various options available  )  While Recurring Deposit plan gives  a fixed income over the years  , Insurance premia  covers Life Risk.Â
- . Mutual Fund Investment is a good option for an small investor  who wants to invest in diversified markets  but has no time to continuously  monitor  his investment and who has no knowledge of the intricacies of stock market .Â
4. Invest your allocation to SIP in Mutual funds  in at least 5 to 10 different funds  , each one investing in different segments . You would spread the risk .Â
5. Risk of a  MF is same as the risk of  asset class it has invested . Further they also carry management charges of AMC  which will be taken out from the fund irrespective of  profitability . If  AMC fund managers take  bad decisions ,  risks of the mutual funds may be compounded and it may turn out worse than direct investment .  Hence study the objective and class of  funds it has invested and the track record of the manager before investment .Â
6. Set the maturity period  of each SIP according to your future requirement of funds for your  life goals .Â
Where to START ?
AMC websites
Most fund companies offer their products to investors through their websites .  If you are  a first time investor, you  need to  approach the fund house or collection centres  to submit the application form. You first download the scheme form from the respective website, fill in your details and submit the same along with the initial cheque, photocopy of PAN card and KYC letter. Once you are assigned a folio number along with the PIN, all subsequent transactions in the folio can be done online using your bank account.  However you need to have separate account for each AMC .Â
Broker platfolio
You can also open SIP account  through your broker account for stocks ,  if the broker offers such a facility.   The units  purchased will be credited directly to your demat account.
Independent portals
There are also independent web portals—FundsIndia , Fundsupermart  , Aditya Birla Money —that cater to mutual fund investors, allowing you to open SIP .Â
Most fund companies offer their products to investors through their websites .  If you are  a first time investor, you  need to  approach the fund house or collection centres  to submit the application form. You first download the scheme form from the respective website, fill in your details and submit the same along with the initial cheque, photocopy of PAN card and KYC letter. Once you are assigned a folio number along with the PIN, all subsequent transactions in the folio can be done online using your bank account.  However you need to have separate account for each AMC .Â
Broker platfolio
You can also open SIP account  through your broker account for stocks ,  if the broker offers such a facility.   The units  purchased will be credited directly to your demat account.
Independent portals
There are also independent web portals—FundsIndia , Fundsupermart  , Aditya Birla Money —that cater to mutual fund investors, allowing you to open SIP .Â
DOCUMENTS REQUIRED FOR BUYING MFÂ
1. Application form  for opening accountÂ
2. KYC form  duly filled .Â
3. Copy of PAN CardÂ
4. Blank cheque Â
5 . Aafhaar Card
2. KYC form  duly filled .Â
3. Copy of PAN CardÂ
4. Blank cheque Â
5 . Aafhaar Card
ELSS SCHEMESÂ
Subscription to certain  notified securities/notified deposits schemes  are eligible instruments under  section  80C for claiming deductions from  taxable income . One such popular investment is  tax saving mutual funds or Equity Linked Savings Scheme (ELSS).  In this  equity diversified fund , investors enjoy the benefits of capital appreciation as well as tax benefits. With  recent positive movements in equity market , more interest is being generated in the public on the scheme .Â
ELSS is basically an equity based diversified Mutual Fund with a lock in period of 3 years .  It has got same risk and reward function of any other  equity based mutual fund  .  While under national saving certificate , funds are locked in a period of 6 years ,  ELSS  has lock in period of 3 years only .  One who is willing to take  market risk , ELSS is a good option as  investment  is tax free under 80C   as also all the returns . Some ELSS funds have been reported  giving good tax free returns over  a long period of time . One has to carefully study the past performance  of the fund  as well as fund manager's performance before investing .  As returns or principal is not  guaranteed and  classified as high risk investment ,  Risk averse  persons  may avoid such investment . Â
ELSS is basically an equity based diversified Mutual Fund with a lock in period of 3 years .  It has got same risk and reward function of any other  equity based mutual fund  .  While under national saving certificate , funds are locked in a period of 6 years ,  ELSS  has lock in period of 3 years only .  One who is willing to take  market risk , ELSS is a good option as  investment  is tax free under 80C   as also all the returns . Some ELSS funds have been reported  giving good tax free returns over  a long period of time . One has to carefully study the past performance  of the fund  as well as fund manager's performance before investing .  As returns or principal is not  guaranteed and  classified as high risk investment ,  Risk averse  persons  may avoid such investment . Â
TIPS Â FOR INVESTING Â in ELSS Â SCHEMESÂ
1..  Check  your  tax rebates  from various investments  like  Provident Fund / Housing Loan  / Education loan / Insurance etc   and find out whether you have any room left for investing under ELSSS . Â
2. Check whether you can afford   a lock in period of 3 years  for the contributions you are going to make  in ELSS  and do not require the funds for next 3 years .Â
3.  Check whether  you are ready to take  Risk associated with market volatility  and whether you can afford such risk  keeping in view of the requirement  of funds in future . Â
4. With above factors  in mind  and  if you are ready  to invest in ELSS  , then follow  the Tips  given  above for purchasing  Mutual funds  as  ELSS  is also   a  mutual fund .Â