• I don’t have enough money to invest
• I’m too busy making money to worry about managing it.
• I don’t have the time or expertise to follow market movements and make investments at the right time

SIP is an investment program that allows you to contribute a fixed amount (as low as Rs.1000) in mutual funds at regular intervals.

This approach allows you to combine

• Convenience
• Rupee Cost Averaging
• Flexibility
• Power of Compounding

Why SIP?

• Investment experts the world over advocate Systematic Investment Plan (SIP)
• Instills the much needed investment discipline
• Puts to work two powerful forces

Power of Compounding

• Preeti started investing at the age of 25. She invested Rs.10,000 each year for ten years and then she stopped contributing
• Rohitstarted investing at the of age 35 and then invested Rs.10,000 each year for 25 years.

 

Rupee Cost Averaging

• Technique of buying a fixed rupee amount of a particular investment at regular intervals, regardless of the NAV
• Different Scenarios
  • Market goes up
  • Market goes down
  • Market goes up and then down
  • Market goes down and then up

Market goes up

 

 

 

 

 

 

Average cost of acquisition = 6000/390 = Rs.15.38
Average cost : = Rs. 15.38
Average Unit price=  Rs. 17.20
Value of investments at the end of 5 months = Rs 9360
Profit of Rs.3360

Market goes down

 

Average cost of acquisition = 6000/430 = Rs.13.95
Average Unit cost = Rs. 13.95
Average Unit Price = Rs 15.60
Value of investments at the end = Rs 4300
Loss is Rs.1700
The loss could have been Rs.3500 for lump sum investment

Market goes up after going down

 

 

 

 

 

 

Average cost of acquisition = 6000/440 = Rs.13.64
Average Unit cost = Rs. 13.64
Average Unit Price= Rs 14.80
Value of investments at the end of 5 months = Rs 8800
Profit is Rs.2800

Market goes down after going up

 

 

 

 

 

 

Average cost of acquisition = 6000/280 = Rs.21.43
Average Unit cost = Rs. 21.43
Average Unit Price= Rs 21.60
Value of investments at the end of 5 months = Rs 5600
Loss is Rs.400 (would have been Rs.1000 if invested at peak price)

SIP -The bottomline

• Simplicity
• Hassle Free
• Low acquisition costs
• Discipline

Some Mutual Funds (Asset Management Companies), equity schemes offer SIP with as low as Rs.500 per month.

Risk factors

Please note that there is no guarantee that SIP will always produce a profit
Before investing, please go through the offer document of the respective scheme for more detailed risk factors.