Systematic Investment Plan - Scenario

Note : Above simulation is to illustrate estimated returns on the set of assumptions. Actual returns may vary and are subject to market risks.

Know more about Systematic Investment Plan (SIP)

  • A Systematic Investment Plan or SIP is a smart and hasslefree mode of investing money in mutual funds. It helps you to create wealth, by investing small amounts of money at specified intervals, over a period of time instead of a heavy one-time investment.
  • A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth by investing an amount as low as Rs. 500 monthly. Investing at an early stage of life lets you enjoy the benefits of two powerful strategies, rupee cost averaging and the power of compounding.
  • SIP allows you to buy units on a specified date every month, so that you can implement a saving plan for yourself. The benefits of this can be enjoyed as and when the need arises for occasions like marriage, education, buying a house or a car etc. and above all, retirement.

Benefits of Systematic Investment Plan (SIP)

  • Inculcates the discipline to save and invest regularly
  • Negates the risk associated with market timing
  • Power of Compounding
  • Rupee Cost Averaging
  • Other Benefits: Auto debit facility across major cities in India, regular account statements, redemption/dividend proceeds directly credited into the bank account

Benefits of Systematic Investment : Power of Compounding

  • Saving a small sum of money regularly in mutual fund schemes can make your money grow with greater power and can have a significant impact on wealth accumulation. A systematic investment plan (SIP) is an effective means to beat market volatility and benefit from the enormous power of compounding over time. The compounding effect can be explained in the illustration below

Note : ​The above is for illustration purpose only. The SIP amount, tenure of SIP and expected rate of return are assumed figures for the purpose of explaining the concept​ of advantages of SIP investments. The actual result may vary from depicted results depending on scheme selected. It should not be construed to be indicative of​scheme performance in any manner.

Benefits of Systematic Investment : Rupee Cost Averaging

Rupee cost averaging is an automatic market-timing mechanism that eliminates the need to time one’s​ investments.

  • Systematic investing reduces the risks significantly so investor doesn’t have to worry about when to invest, how much to invest etc. considering daily market movements.
  • ​ Smoothens the impact of market fluctuations and hence reduces risks associated with investing in volatile markets
  • ​ Eliminates the need to time your investments in equities. Smoothens the impact of market fluctuations and hence reduces risks associated with investing in volatile markets
  • The risk of market volatility gets negated with more units being purchased when the price is low and fewer units being bought when the price is high

Benefits of Systematic Investment : Rupee Cost Averaging

Hence, at the end of SIP period total units purchased will be 250 & cost per unit will be 48/-.

Thus, the​ profit for an SIP investor from the above investment will amount to 524/- (13,244 – 12720)