Wealth Management India

Systematic Investment Plan

A SIP is an investment methodology wherein a fixed amount of money is invested in a chosen asset class such as a mutual fund over regular intervals of time. This is usually done for a period of many years in order to create wealth. Starting an SIP is beneficial in many ways. To begin with it does not require an investor to commit a large sum of money upfront into an investment product. It is ideal for investors who earn a regular income via employment, renting out real estate or by other means.

We assist investors in setting up a direct debit programme to facilitate an SIP. Upon initiation the money is automatically debited from an investors account on a predetermined date and transferred to the chosen asset class. We monitor the SIPs performance and recommend re-balancing if required. Upon the transfer of the amount each month a statement of accounts containing the latest holdings is generated and provided to the investors.

The SIP approach to investing is especially useful when the markets are volatile or overvalued, this concept called ‘Rupee Cost Averaging’. It simply means buying more units of an investment product whilst it is cheap and vice-versa. This averages out the cost of owning all the units to a lesser amount than what would otherwise be spent in buying all the units upfront (see Example). In the long run rupee cost averaging coupled with compound interest can provide the investor great returns on his investments.

The success of an SIP programme for an investor is governed by three factors I.The regularity of investments II. The ability to stay invested for a prolonged period of time. III. Starting an SIP programme as early as possible, the duration of investment is often more important than the sum invested itself (see Example).

Use the SIP Calculator below to estimate the returns you would generate on your monthly investments over a desired time horizon.

SIP Calculator

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Listed below are the historic investment performances of equity based mutual funds for an investment of rupees 5000 each month for a period of 20 years (Total investment rupees 12 Lakhs).

1) HDFC Equity Fund: Launched on 1st January 1995. Starting an SIP of Rs. 5,000 in this fund on 1st April 1998, your investments would have grown to Rs.1.95 crores by 1st April 2017, which would imply a CAGR return of 23.56% over 20 years.

2) Reliance Growth Fund: This fund has generated a CAGR return of 23.68% since its inception. A Rs.5,000 SIP in this fund, started on the 1st of April 1998 would have accumulated a corpus of Rs.2.12 crores by 1st April 2017.

3) Franklin India Prima Fund: A flagship fund of Franklin Templeton India. Starting an SIP of Rs. 5,000 in this fund on 1st April 1998, your investments would have grown to Rs. 2.38 crores by 1st April 2017, giving a CAGR return of 25.1% over 20 years.

4) Reliance Vision Fund: Launched on 8th October 1995, it has generated a CAGR return of 19.92% till date (March 2017). A Rs.5,000 SIP in this fund, started on 1st April 1998, would have generated Rs.1.46 crores by 1st April 2017.

5) HDFC Top 200 Fund: This flagship fund of HDFC Mutual Fund has generated a CAGR return of 20.88% since its inception in September 1996. A SIP of Rs.5,000 in this fund on 1st April 1998, your investment would have grown to Rs.1.43 crores by 1st April 2017.

Disclaimer: Investors are advised to make their own assessments before acting on the information. Past performance is not an indicator of future returns. To start an SIP contact us here.