Systematic Investment Plan


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.

How does a SIP work ?

  • 1. Decide the amount to be invested per month
  • 2. Choose a scheme
  • 3. Issue cheque for 1st installment.
  • 4. Future installment will be debited from your BankAccount.
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.

Small Investments Mega Returns :-

Investors who invested Rs. 10,000 every month in the following schemes would have reaped these returns
Scheme Growth Nav** Value ** Annual Return
Reliance Growth 483.5615 36,83,806.10 33.20%
HDFC Equity Fund 289.9610 3,466,429.37 31.70%
SBI - M Sector Fund Umbrella Contra 171.556 2,481,079.29 23.46%
Franklin - India Oppt Fund (G) 32.8452 2,312,185.64 21.73%
Kotak - 30 (G) 105.5410 2,654,096.36 25.11%
 
* SIP Start date: 28-Dec-2002 ; SIP End Date: 29-Nov-2010
** Total Investments: 960,000 ; NAV & Value as on: 29-Nov-2010