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Magic of Mutual Fund Systematic Investment Plan (SIP)

Magic of Mutual Fund Systematic Investment Plan (SIP)

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
What is Systematic Investment Plan (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

sip

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

Mutual Fund
3 YearsInvestment 36000 5 YearsInvestment 60000 10 YearsInvestment 120000 12 YearsInvestment 144000
Scheme Name % Amount % Amount % Amount % Amount
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

Mutual Fund SipYou can Download Systematic Investment Presentation ppt

Wasn’t that simple, and this is the reason we call SIP a SIMPLE INVESTMENT PLAN.

Systematic Investment Plan Calculator

Important Points:

  1. Figures are in Dollar($) but you can treat them in Rupees.
  2. In Compounding Keep it Annually
  3. Notice in last years how fast your assets grow.
  4. 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

Was this article helpful?? If you have some query feel free to ask.

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{ 7 comments… add one }

Leave a Comment

  • SS Bansal April 8, 2015, 5:45 pm

    Sir,
    Congrats & my best wishes.
    I am keen to learn about MF investing as well as transfer my knowledge to other readers through this blog.
    Will be happy of any reader to resolve issues related to MF investments.
    Thanks
    SS Bansal

    Reply
  • Satish April 8, 2015, 7:20 pm

    Hi Nice article on SIP, Want to know why DSP BR Top 100 not seen in the list. Am investing in this fund through SIP growth from long term say 3 to 4 yrs. How about this fund for long term say 10-20 yrs.

    Reply
    • Anil Kumar Kapila April 18, 2015, 2:33 pm

      It is not possible to predict the performance of any fund for 10-20 years. Investor must keep tracking the performance of his fund regularly.

      Reply
  • avinesh goyal April 12, 2015, 7:23 pm

    SIR I HAVE SOME SIP AS PER FOLLOW AS BELOW:
    HDFC TOP 200: Rs. 1000
    ICICI VALUE DISCOVERY REGULAR FUND: Rs. 1000
    ICICI FOCUSED BLUECHIP FUND: Rs. 1000
    FT INDIA PROMA FUND: Rs. 1000
    FT INDIA INDEX FUND NIFTY PLAN: Rs. 500
    HDFC GOLD FUND: Rs. 500
    SBI GOLD FUND: Rs. 500
    NOW, I WANT TO REVISED ALL THE FUND PLEASE HELP ME & SUGGEST AS SOON AS POSSIBLE.

    Reply
    • Anil Kumar Kapila May 11, 2015, 8:08 am

      I think I had replied to this. Investing in gold funds of two fund houses does not make any sense. No need to invest in so many funds. Three or four good funds are enough. Do not invest in more than one fund of a fund house.

      Reply
  • lakhbir singh May 8, 2015, 11:20 am

    i invest in following manner:-
    SIP as Rs.2500/- quantum mf equity long term
    SIP as Rs.2500/- quantum mf gold saving
    SIP as Rs.1000/- Kotak Growth 30g
    One time Rs.1.00lacs in Franklin India tax shield
    One time Rs.1.00 lacs in Quantum tax saving
    SIP 4000/- SBI Rd
    can anybody suggest/advise me about i am going to right direction or not

    Reply
    • Anil Kumar Kapila May 11, 2015, 8:14 am

      Why three funds of the same fund house? Normally SIP is a better option than lumpsum investment.

      Reply