SIP

What is SIP? | What is Systematic Investment Plan | 1 Best Investment Idea

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Mutual Funds

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Systematic Investment Plan (SIP).

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Systematic Investment Plan (SIP). This will be a complete guide on Systematic Investment Plan (SIP). Please read till end of the blog post to know the complete information about this Systematic Investment Plan (SIP). Lets get started.

What Is SIP?

SIP stands for Systematic Investment Plan. SIP is a systematic method of investing your money in Mutual Funds. A SIP is a planned approach towards investments and it helps you to develop the habit of saving and building wealth for the future.

How Does Systematic Investment Plan Work ?

  • Choose a mutual fund scheme that you want to invest.
  • Decide the investment amount and the term.
  • Decide the investment frequency (Weekly, monthly, quarterly, half-yearly or yearly).
  • As you invest, units are allocated as per ongoing market rate (called NAV or Net Asset Value).
  • You will get more units when the price is low and less units when the price is high.
  • At the end of the term, you can redeem the units and get the accumulated amount.
  • You also have the option to redeem partially and extend the investment further.

Features of Systematic Investment Plan ?

  • One of the best ways to enter equity market.
  • Helps you to invest as little as Rs. 500 every month.
  • Helps you to develop the habit of discipline and regular investments.
  • No need to time the share market.
  • Rupee-cost averaging.
  • Compounding returns – small investments every month can create a big corpus over time.
  • Flexibility in investing. You can increase or decrease your SIP amount

Disadvantages of Systematic Investment Plan ?

  • SIP returns is not guaranteed and it may vary based on market conditions.
  • SIP doesn’t work well in the rising markets as you get less and lesser units with every instalment. So, the “rupee cost average” concept may not work on rising markets. It means less returns to the investor.
  • If you opt for SIP in tax saving funds like ELSS, then each instalment will be locked for 3 years.

Rupee Cost Averaging in Systematic Investment Plan

  • In volatile markets, investors are worried about whether to invest their money or not.
  • SIP helps you to invest without timing the Share market or worrying about the volatile nature of the Share market.
  • Investors get more units when the price is low and less units when the price is high.
  • Thus, it averages out your accumulated units and this concept is known as “Rupee Cost Averaging”.

Power Of Compounding

  • Albert Einstein once told “Compound Interest is the 8th wonder of the World. Those who understand will become rich. Those who don’t understand will remain poor”.
  • If you start to invest early, then you will have more time for your money to grow.
  • Small amount invested today will become a big corpus over time.

Mode Of Systematic Investment Plan

You can opt for one of the following modes to invest in SIP schemes.

  • Weekly
  • Monthly
  • Quarterly
  • Half-yearly
  • Yearly

Systematic Investment Plan In Tax Saving Funds (ELSS)

  • You can opt for SIP in Tax savings mutual funds like ELSS (Equity Linked Savings Scheme).
  • But, note that every instalment amount of SIP will be locked for 3 years.
  • For example, if you opt to invest Rs. 1,000 for 6 months, then every investment of Rs. 1,000 will be locked for 3 years.

Earning | Returns Projection Table of Mutual Funds through SIP.

Let us take an example of Monthly investment in Mutual funds through SIP (Systematic Investment Plan) . We will consider few factors here.

  • Monthly Investment Amount
  • Expected Interest rate %
  • Number of years investment and maturity amount.
Monthly Investment AmountExpected Interest rate %for 5 years Maturityfor 10 years Maturityfor 15 years Maturityfor 20 years Maturityfor 25 years Maturityfor 30 years Maturity
500012%4,05,94611,21,36423,82,17346,04,15185,20,0341,54,21,158
500015%4,37,41113,17,20330,86,77966,46,0271,38,04,9472,82,04,091
1000012%8,11,89322,42,72847,64,34792,08,3021,70,40,0683,08,42,317
1000015%8,74,82326,34,40761,73,5581,32,92,0542,76,09,8945,64,08,182
1500012%12,17,84033,64,09271,46,5211,38,12,4532,55,60,1024,62,63,475
1500015%13,12,23539,51,61192,60,3371,99,38,0824,14,14,8418,46,12,274
2000012%16,23,78744,85,45695,28,6951,84,16,6043,40,80,1376,16,84,634
2000015%17,49,64752,68,8141,23,47,1162,65,84,1095,52,19,78811,28,16,365
2500012%20,29,73456,06,8201,19,10,8682,30,20,7554,26,00,1717,71,05,792
2500015%21,87,05965,86,0181,54,33,8953,32,30,1376,90,24,73514,10,20,456
3000012%24,35,68167,28,1851,42,93,0422,76,24,9065,11,20,2059,25,26,951
3000015%26,24,47179,03,2221,85,20,6743,98,76,1648,28,29,68216,92,24,548
Earning Projection

You can see in the above table how you can build your wealth by investing small small amount through SIP. Hence don’t delay to open your account and start your SIP today.

Open your account to start your SIP today

You can start invest in mutual funds through SIP with the following Mobile apps with Zero commission charged. Please click on the Image to open the account today with free of cost and start your first SIP today.

FAQ About SIP

Is SIP A Financial Product?

No. SIP is not a financial product. It is just a method to invest your money in Mutual Funds schemes.

What is the Duration Of SIP?

Minimum investment duration is 6 months. Maximum investment duration is as long as you want to invest. There is no maximum limit on duration. Longer the better to avail the maximum use of Power Of Compounding.

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