Systematic Investment Plan in Mutual Fund is commonly named SIP – is really getting popular in India. Systematic Investment Plan is such a beautiful tool, which if used properly can help you to achieve all your financial goals. Some time back we wrote “Do you really understand Systematic Investment Plan” which is one of the most popular article of TFL, but readers requested that they want to read more about basics of Mutual Fund SIP. So here it is..
This Article will cover
|Magic of SIP|
|Advantage & Benefit of Systematic Investment Plan|
|Best Systematic Investment Plan in India|
|Systematic Investment Plan Presentation with Facts & Figures
|SIP Presentation with Examples & Analogies (I like this one 🙂 )
|This article was published on TFL – 2011
What is Systematic Investment Plan?
We all have various financial obligations. Some of them like daily needs, school fees, etc involve the major outgo of your cash. Others like trip for your family or buying a fancy gizmo entails a one time payments for which money can be relatively easily collected. But for long term goals like retirement or purchasing a home require you to save and invest for many years. Yet irrespective of the amount involved and the time horizon, planning and investing money systematically and regularly enables you to sail through these obligations. A SIP could prove to be a simple and effective solution toward achieving these goals.
A SIP is a method of investing in mutual funds, by investing a fixed sum at a regular frequency, to buy units of a mutual fund schemes. It is quite similar to a recurring deposit of a bank or post office. For the convenience, an investor could start a SIP with as low as Rs 500; however this amount may differ from one fund house to other.
Benefits of Systematic Investment Plan
1) What is your equation to investments:
EARN->SPEND->SAVE OR EARN->SAVE->SPEND
The first is a wrong way of investing. You should be saving in a disciplined manner and SIP enables you to follow the second, which is the correct equation of investments.
2) Power of compounding: SIP make sure that you are not only benefited on your investment but you also get returns over the interest which in overall will result generating greater returns.
3) Easy, Flexibility and Liquidity: SIP is easy to start, manage and stop. It gives you flexibility to choose a desired scheme or to with draw in parts. And with conditions you have the money for contingency and emergency use.
4) You can also do SIP in ELSS (Equity Linked Saving Scheme) to save tax under section 80 C.
To check complete list of benefits – you must read this article “Benefits of Investing Systematically.”
Best Systematic Investment Plans in India
||3 YearsInvestment 36000||5 YearsInvestment 60000||10 YearsInvestment 120000||12 YearsInvestment 144000|
|Birla Sunlife Equity Fund||26||51990||17||92033||29||570925||27||847695|
|DSP BR Equity Fund||30||55142||22||103852||32||656368||28||890730|
|Franklin India Blue Chip Fund||28||54785||20||98935||29||549491||27||860441|
|HDFC Equity Fund||39||61979||26||112626||34||721916||32||1142897|
|HDFC Top 200 Fund||34||57909||24||109045||33||706670|
|ICICI Prudential Growth Fund||25||51186||16||90158||25||437115||22||616589|
|Reliance Growth Fund||29||54014||21||100716||38||901404||35||1407815|
|Reliance Vision Fund||25||51789||17||91941||33||677154||31||1078457|
|SBI Magnum Global Fund||29||54249||16||88337||31||607379||26||793162|
|Sundaram Growth Fund||24||50576||15||88069||25||458342||22||617858|
|Tata Pure Equity Fund||27||52625||19||95385||29||554004||25||727228|
*Calculations are done on 1st day of 2011 – Monthly Investment of Rs 1000
I will again say Best comes after postmortem report – you should see them as Top Systematic Investment Plans in Last 10 Years or just Systematic Investment Plan Comparison.
Calculations are done on Rs 1000 per month investment to keep things simple. If you would like to calculate for Rs 5000 or Rs 10000 – you can multiply the amount by 5 or 10.
Systematic Investment Plan Presentation
If you like facts & figures check this SIP presentation by DSPBR Mutual Fund
If you like stories & analogies check this presentation by TATA Mutual Fund
Wasn’t that simple, and this is the reason we call SIP a SIMPLE INVESTMENT PLAN.
Systematic Investment Plan Calculator
- Figures are in Dollar($) but you can treat them in Rupees.
- In Compounding Keep it Annually
- Notice in last years how fast your assets grow.
- Try 2 things to check impact of Power of Compounding:
- Take interest 5%(Insurance Endowment Plans), 8%(your debt investments) & 12-15%(Diversified Equity Mutual Funds)
- Take 15 Years & 30 years
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