You have heard many times the term SIP. What is SIP of a Mutual fund?
SIP is actually a Systematic Investment Plan of investing in Mutual Fund. It is specially designed for those who aim to build wealth over a long period and want a better future for him and their dependants.
The investment in a Mutual fund can be done in two ways. First way is one time payment i.e. making payment to a fund at once and gets the units of the fund as per the Net Asset Value (NAV) of the fund on that day.
A person wishes to invest in a fund Rs. 24,000/- . On the day of Investment, the NAV of the fund was Rs. 10/-. He gets 2400 units @ Rs. 10/- per unit.
The other way of investment is making payment to the fund periodically, which is termed as Mutual Fund SIP. When you commit to invest a fixed amount monthly in a fund, it is called as Systematic Investment.
It is actually beneficial for those investors who wish to invest a large amount in a fund and wishes to create a large chunk of wealth for long term but due to financial constraints are able to do so.
The SIP provides them a way to invest in the fund of their choice in installments.
Eg. A person wishes to invest Rs. 24000/- in a fund but due to other obligations, it is not possible for him to invest such an amount in a fund. He takes the SIP route and contributes to the fund Rs. 2000/- monthly for a year. At the end of the year, he’ll have invested Rs. 24,000/- in the fund. When the NAV is high, he will get the fewer units and when the NAV is low, he’ll get the more units. So, he’ll get the benefit of averaging through the SIP route.
The NAV in the first month was Rs. 10/-, he’ll get 200 units in the first month
The NAV in the second month was Rs. 9.50/-, he’ll get 210.52 units in second month
The NAV for the following month was Rs. 10, he’ll get 200 units in the next month
So, at the end of the year he may get more units as compared to the units he’ll get through single investment.
Benefits of SIP
1. SIP can be started with a minimum investment of Rs. 500/- per month or Rs. 1000/- per month.
2. It is good and effective way of creating wealth for long term.
3. ECS facility is available in case of Investment through SIP.
4. A small withdrawal from the account doesn’t affect the bank balance of an individual as compared to a hefty withdrawal.
5. It can be for a year, two years, three years etc. if a person at any point of time couldn’t be able to continue its SIP, he may give instructions atleast 25 days before to the fund house. His SIP be discontinued.
6. All type of funds except Liquid funds, cash funds and other funds who invest in very short fixed return investments offers the facility of SIP.
7. Capital gains, if applicable, are taxed on a first-in first-out basis.
8. As the investment made through SIP are not at one time. Some units bought at high price and some at low price, so chances of making gain through SIP is higher than the one time investment.
In short, SIP is a simple and effective way to create wealth but to create such wealth, one should think about the investment in SIP for a period of atleast for time frame of three years because it pays to invest in a longer run.
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| Author: Sarang Parikh 25 Jun 2009 | Member Level: Bronze Points : 2 |
Yes,long term Investment through SIP of Mutual Fund is the best way of creating wealth in long run with a instalment of minimum amount.But for your knowldge only SIP of rs. 100 is available with reliance mutual fund also SIP of rs. 250 is available with Sundaram BNP Paribas. SIP is the best way because the benifit of rupee cost averaging . Also in long run the market risk will reduce.
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| Author: soubhagya das 07 Jul 2009 | Member Level: Diamond Points : 1 |
Dear Monsa this is a very fantastic information and I hope if any of member from ISc will implement it and will start saving(investing) Rs100 in mutual fund either at Reliance or SBI mutual fund then that will be tyhe most beautiful and precious gift for you
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| Author: monsa 08 Jul 2009 | Member Level: Gold Points : 1 |
Dear Soubhagya,
Definitely it will. Even i am investing in Mutual Funds through SIP and believe me, it is the safest bet.It doesn't burden your pocket with single heavy investment.
SIP is a smart way to invest and grow.
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| Author: soubhagya das 08 Jul 2009 | Member Level: Diamond Points : 2 |
Monsa I am a financial planner I am suggesting my friends to invest in mutual funds through SIPs and they are happy with it.
so you also please advice your friends and show how you have invested and what benefit you are getting then it will attract them and I think we can control our Indian share market instead of depending upon FIIs( Foreign Institutional Investors)
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| Author: Srikanth Shankar Matrubai 21 Jul 2009 | Member Level: Silver Points : 2 |
SIP Investment is a no-brainer. They are the best way to minimise risk and still earn through the Stock Markets.
SIPs are very convenient and very easy to participate because of their low minimum investment amount.
In fact, some AMCs like Reliance, SBI, Religare have SIP for as low as Rs.100 per month.
Do you know, if you had invested in Reliance Growth Fund, since its inception 165 months ago, your investment of Rs.100 per month would have meant an outgo of Rs.16500 and can you believe, that simple Rs.100 per month would have now grown into a huge unbelievable Rs.1,97,000!!!! Just under RS.2 lakhs.
That's the power of SIP Investment.
Also read the more about the power of sip in the link http://www.indiastudychannel.com/resources/57447-Systematic-Investment-Plan-SIP.aspx
Best of luck,
Srikanth
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| Author: vidya bhushan jha 24 Oct 2009 | Member Level: Silver Points : 2 |
hi dude, sip is the best medium to invest in market, it is the bless the new investor who want to invest in market. 15 to 20 years sip worth ro 1000 per month gives that amount which u dont believe.I want to give some example reliance mutual fund growth gives 19laks by investing 1000 per month. in about 15 years.
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