SYSTEMATIC INVESTMENT PLAN

Systematic Investment Plan (SIP) is a convenient way to accumulate wealth in a disciplined manner over a long-term period. It helps one to invest regularly in small installments and thereby build wealth over a period of time. Mutual Fund SIP is similar to a Recurring Deposit. Every month on a specified date an amount you choose is invested in a mutual fund scheme.

Let's assume an individual invests Rs. 10000 per month. The amount invested in:

One year: Rs. 120000

Three years: Rs. 360000

Five years: Rs. 600000

The amount at the end of the respective years along with their percentage returns are given in the table below:

SIP Returns

Name of the fund	Amount (2009-10)		Last 1 year return* (%)	Amount (2007-10)		Last 3 years return* (%)	Amount (2005-10)	Last 5 year return* (%)
UTI Master Value Fund	149268.15		24.39	602257.16		67.29	1064781.49	77.46
HDFC Top 200 Fund	139783.61		16.49	549221.76		52.56	1084387.96	80.73
IDFC Premier Equity Fund	154568.4		28.81	621438.79		72.62	1280282.91	117
DSP Blackrock Top 100 Equity Fund	132331.86		10.28	485731.2		34.93	980481.51	63.41

Note: This is not an exhaustive list of mutual funds for SIP. These funds are shown for illustrative purpose only.

*Absolute returns

 

Benefits of Systematic Investment Plan

• Average out on market fluctuations
  

  by investing through SIP route. This strategy helps in buying more units when the price is low and lesser units when the price is high. However, over a period of time these market fluctuations are generally averaged. And the average cost of investment for an investor is reduced.
  

• Increases returns

  
  through the concept of 'power of compounding'. Mutual Fund SIP if continued for long term helps in accumulating additional units every month hence returns are generated on additional units as well as on the whole corpus built through SIP. Thus increasing returns through compounding effect.
  

• Invest disposable funds

  
  that might otherwise lie in Savings accounts, earning low interest and letting inflation eat into them.
  

• Timing of the market is not required on part of the investor.

  
  

A small sum invested every month from the beginning of your work-life can lead to a very impressive amount at the time of one's career. Why wait? Start systematic investment today to reap the benefits in future…..