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Overview |
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Dreams can only be achieved if you work towards them. Even building wealth is no
different. A Systematic Investment Plan (SIP) helps you do just that. With SIP,
you can invest a fixed amount in mutual funds step-by-step monthly or quarterly
over a period of time, thereby averaging out your cost of investing and
benefiting from the power of compounding. The power of compounding works best as
you stay invested helping your money earn money over the years. After all, it is
the time in the market and not timing the market that helps you create wealth
for your dreams in life. So, dream more and achieve much more. Start investing
through a SIP today and work towards achieving your dreams.
How SIP works?
SIP is a method of investing a fixed sum, regularly, in a mutual fund scheme. SIP allows one to buy units on a given date each month, so that one can implement a saving plan for themselves.
The biggest advantage of SIP is that one need not time the market. In timing the market, one can miss the larger rally and may stay out while markets were doing well or may enter at a wrong time when either valuation have peaked or markets are on the verge of declining. Rather than timing the market, investing every month will ensure that one is invested at the high and the low, and make the best out of an opportunity that could be tough to predict in advance.
An investor can invest a pre-determined fixed amount in a scheme every month or quarterly, depending on his convenience through post-dated cheques or through ECS (auto-debit) facility. Investors need to fill up an Application form and SIP mandate form on which they need to indicate their choice for the SIP date (on which the amount will be invested).
Subsequent SIPs will be auto-debited through a standing instruction given or post-dated cheques. The forms and cheques can be submitted to the office of the Mutual Fund / Investor ServiceCentre or nearest service centre of the Registrar & Transfer Agent. The amount is invested at the closing Net Asset Value (NAV) of the date of realisation of the cheque.
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In short - Why SIP?
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Disciplined approach to investments |
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No need to time the market |
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Harness the power of two powerful Investment strategies:
- Rupee Cost Averaging - Benefit from
Volatility
- Power of Compounding - Small investments
create Big Kitty over time
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Lighter on the wallet |
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Reap benefits of starting early |
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Secret to achieving MuchMore with SIP |
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List down your dreams and goals and work out a plan to achieve them
through SIP |
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Ascertain the monthly/quarterly SIP required to achieve your goals |
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Identify the scheme(s) in which you would like to invest and
complete the formalities for SIP investment including forms and cheques |
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Invest for the long term as the twin benefits of power of
compounding and rupee-cost averaging work through different market cycles |
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Diversify your investments for your dreams through multiple SIPs in
different schemes to optimise returns as per your needs |
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Benefits of SIP |
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Power of Compounding
When you invest regularly through SIP and invest for the long term, the benefits are magnified by the compounding effect. Your money grows over time as the money you invest earns returns. And the returns also earn returns, i.e. in effect your actual investments over time plus returns get compounded over the years which can grow into a large sum over a period of time.
For example, the graph demonstrates the effect of compounding on monthly investments of Rs. 1000 for a period of 30 years in investments offering different rate of returns, i.e. 6%
p.a., 10% p.a. and 15% p.a. A monthly investment of Rs. 1000 for 30 years in an investment offering 6% p.a. return can give you Rs. 10 lakhs vs. Rs. 70 lakhs an investment offering 15% p.a. return.
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The above is for illustrative purpose only.
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Power of Starting early:
The earlier one starts saving and investing regularly, the easier it is to achieve your goals. The graph below shows the impact of beginning to invest Rs. 1000 monthly at various stages of life till the age of 60 years (assuming a return of 10% p.a.). The graph below shows that a difference of `15 lakhs is seen at 60 years if one starts investing Rs. 1000 earlier by 5 years. If an investor begins investing at 25 years of age, then a corpus of over RS. 38 lakhs is available vs. a corpus of over Rs. 22 lakhs if one begins investing at 30 years of age.
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The above is for illustrative purpose only.
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