2. 2
What is a SIP ?
SIP means Systematic investment Plan
It is one of the ways to Invest in Mutual Funds
Through SIP you can invest in mutual Funds
in small investment on a monthly basis
The investment is done directly by debiting
your bank account on a specified date
You can start your SIP by filling up a simple
SIP form and providing bank auto debit
Mandate.
3. Things you should know about SIP
Your SIP does not stop if you miss an
installment
The AMC does not charge you any money for
missing an installment
Your bank however, may charge you as per
banks policies
All SIPs are done in open ended funds
There is no lock in for your SIPs ( except tax
saving)3
4. Features of SIP
Affordable to small investors
Low market risk through rupee cost averaging
Compounding effect
Easy liquidity
Easy mode of Payment
4
5. Advantages of SIP
It is entirely mechanized process and involves
no complications
Investments are consistent and steady
Power of Rupee Cost Average : Market’s
volatility shall work wonders for you.
It enables to over come spending and
encourage savings, thereby securing future
It will not cause strain on one’s budget as
amount invested is very less5
6. Disadvantages of SIP
Limited options of dates.
Way out
Fixed amount
Stopping intermediate payment:
Lot of delay between actual application &
start/stop of SIP:
Does not suit people with unpredictable cash
flows
6
7. Disadvantages of SIP
Portfolio risk remains
Ignore the market Swings
Periodical review of investments
Timeframe for the Mutual Fund SIP:
Contribution towards Mutual Fund SIP Changes
Portfolio Review and Mutual Fund SIP
7
8. 8
Why Invest ?
Children’s education / marriage
Medical Emergency
Retirement
Aspirational goals – House , Foreign Holiday
Other Obligations
9. 9
The lower interest rates over the years have been worrying
him.
He decides to take the help of Sreeni , financial advisor.
After carefully evaluating his financial goals and time required
to achieve his financial goals , he advises him to invest in
equity mutual funds for following reasons
— Portfolio diversification
— Superior returns ( refer slide on cumulative annualized returns
for different asset classes for details )
Systematic Investment Plan
10. 10
However, Anil is not comfortable investing into equity
mutual funds as they are volatile and therefore risky
and avoidable.
Sreeni advises Mahesh to register for Systematic
Investment Plan (SIP) and make use of volatility in
the market rather than get worried and avoid
investing in equity mutual funds.
Anil is not clear as to how SIP will work to his
advantage and requests for more details
Sreeni explains as follows :
Systematic Investment Plan
11. 11
Systematic Investment, An
example
Rahul & Viru are two friends. Rahul decides to invest using SIP
whereas Viru decides to make lump sum investment.
14. 14
Why Systematic Investing?
The Goal of most investors is to buy when the
prices are low, and sell when the prices are
high.
Sounds simple, but trying to time the market
like this is :
1. Time Consuming
2. Risky
3. And almost Impossible
A more successful strategy is to adopt
Rupee Cost Averaging.
15. 15
Three common reasons for not
investing
I don’t have enough money to invest
I am too busy making money to worry about managing
it
I don’t have the time or expertise to follow the market
movements and make investments at the right time.
SYSTEMATIC INVESTMENT PLAN
is the only answer to all reasons.
16. 16
How to make Sip work for you ?
Set your financial goals
Identify the scheme
Decide the SIP amount
Look for a long term commitment
Aim for the big picture
Start investing.