Systematic Investment Plan : Mutual Funds are very trending and most middle-class people want to invest in mutual funds to get good returns, but due to a lack of knowledge of mutual funds and investing and the downfalls of mutual funds, many people hesitate to invest in mutual funds. But there is a new scheme for those individuals who are afraid of loss in mutual funds. You can invest in a Systematic Investment Plan (SIP), which is the easiest way to invest in mutual funds where you can start with 150 rupees only.
So if you are interested then read this article to get all the information on the Systematic Investment Plan (SIP), including the eligibility criteria, investment, calculation of the return, and other benefits of the SIP investment plan. A Systematic Investment Plan, (SIP), is a popular and convenient way to invest in mutual funds. Individuals can invest in a systematic investment plan a fixed investment at equal intervals.
Companies are providing facilities to invest in SIP plans every month, quarterly basis, 6 months, and yearly according to the capability of the investor. Mutual Funds are known to invest a large amount in the market so most of the middle-class persons who do not have sufficient amounts to invest in mutual funds but are aware of the benefits of investment in mutual funds cannot afford this scheme.
So, these applicants can apply under the SIP plan of mutual funds where they need not invest the whole amount at one time but will get the flexibility to pay a fixed amount at regular intervals. So little monthly investment in mutual funds under the SIP plan may provide higher interest and payback after completing the maturity.
Systematic Investment Plan (SIP)
SIP stands for ”Systematic Investment Plan”, a method of investing in mutual fund schemes where an investor invests a fixed amount of money at regular intervals (usually monthly or quarterly) rather than making a one-time investment.
SIPs offer a disciplined and convenient way for investors to build wealth slowly, benefit from rupee cost averaging, and harness the potential of compounding over the long term. This approach is well-suited for individuals in India looking to achieve various financial goals, such as wealth creation, retirement planning, or financing education while providing flexibility to adapt to changing financial circumstances.
Features of Systematic Investment Plan
You can check the following features of Systematic Investment Plan which is gaining the interest of middle-class citizens to invest in mutual funds :-
- SIP plan is more flexible and customer-centered where investors can choose the investment plan every month and can also choose the investment amount that is suitable according to their monthly income. This investment will not affect the expenditures of the person but will also enable them to invest in the mutual fund due to its flexibility.
- Investors can buy new units by checking the market value from time to time which will increase their understanding of mutual funds and will develop the market strategy to invest in a particular unit. So when the market goal is down you can buy more units and when the market is high you can buy a few units according to your funds.
- This Systematic Investment Plan include a risk tolerance for a new investor in mutual funds as they can choose the minimum investment plan at the initial stage and after that can increase their monthly or specific interval investment according to their need.
Benefits of Systematic Investment Plan
- Rupee-cost averaging, through regular fixed investments, helps reduce the impact of market volatility on your portfolio by purchasing more units when markets are low and fewer when they are high.
- SIP benefits from professional fund management, potentially leading to better outcomes than individual stock picking.
- SIP encourages financial discipline by encouraging consistent, fixed investments over time.
- Systematic Investment Plan harnesses the power of compounding, reinvesting returns to boost your portfolio’s value over time.
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Eligibility to invest in Systematic Investment Plan
- You should have an account with a mutual fund providing a company.
- You should have a PAN card and it should be more than 18 years to invest in mutual funds.
- There are no specific criteria for investment in mutual funds so anyone who has a sufficient amount to invest and a good knowledge of mutual funds is invited by companies to invest through their platforms.
Apply in the Systematic Investment Plan
If you want to invest in Systematic Investment Plan, then you can download any mobile application that provides mutual fund investment facilities after that you have to create an account on the mobile app by providing personal details and banking information.
Once you complete the KYC by providing your PAN card and Aadhar Card details your status with active and you can invest in an SIP Plan for mutual funds.
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Invest 150 and get 22 lakh after 18 years
Most of the companies are providing up to 12% returns to the investors under the SIP plan of mutual funds. If you invest 150 daily or 4500 per month for the upcoming 18 years, then your lump sum investment will be 8,10,000. The company will provide you a 14.6 lakh return on your investment after completing the majority so you will get more than 22 lakh after 18 years of investment in the SIP plan.
However, it is an approximate amount and investment so if you are going to invest you should manually check all the charges and return amount from the company before investing.
How Systematic Investment Plan Works ?
Before you set up your Systematic Investment Plan, there are a few essentials you need to know about how SIP functions.
There are four stages to investing in SIP from the beginning to the point where your funds are invested in a mutual fund plan:
Choose a mutual fund scheme :-
- As your first step in the SIP investment journey, you need to choose a mutual fund scheme you want to invest in.
- If you need some help with choosing a mutual fund, take a read through our primer on how to choose a mutual fund.
Choose the investment frequency :-
- The next step in your SIP investing journey is to choose an investment frequency you feel comfortable with. The most common choice, especially among paid investors, is a monthly frequency since they receive their salary monthly.
- However, if you have reasons to choose a different frequency, you may choose to invest weekly, quarterly, semi-annually, or annually.
Set up SIP with a mutual fund scheme :-
- Setting up your SIP is a simple process once you’ve chosen a mutual fund. On ET Money, go to your selected mutual fund, and click on invest.
- If you’re a first-time investor, complete your KYC and enter the bank details along with your SIP contributions and frequency, and you’re done. The process has been illustrated in detail in a subsequent section.
Automatic debits and unit allotment based on NAV :-
- Once everything is set up, money will be deducted from your registered bank account. It will be debited every month based on the date you selected while setting up the SIP.
- This is an automated process. The funds will keep debiting from your bank account depending on the frequency you entered while setting up the SIP.
- After the money is debited, you’ll soon receive acknowledgment about your funds being invest. The acknowledgment also includes the number of units you’ve been allotted based on the NAV (net asset value).
- The number of units allocated for each contribution may vary because the NAV changes every day.
Types of Systematic Investment Plan
Now that a lot of ground has been covered on what SIP is, how SIP works, and the advantages of SIP, let’s talk about the types of SIPs you can opt for.
Fixed SIP :-
- Fixed SIPs is the plain-vanilla version of SIPs. You choose an amount, and a date till which you wish to donate, and the rest of the process is automated.
Top-up SIP :-
- Top-up SIPs are great for investors who want to increase their SIP contributions periodic. An example of where top-up SIPs make a lot of meaning is when your income continues to increase every year.
Perpetual SIP :-
- Perpetual SIPs are just fixed SIPs sans duration. Once registered, your bank account will be debited with the amount of the SIP contribution unless you direct the fund house to stop withdrawals.
Flexible SIP :-
- It offers you the flexibility to change the amount per donation or skip a few contributions if you so choose. There are two possible reasons an investor might want to change the contribution amount or skip a contribution. First, your contributions via SIP are adjusted based on the market’s overall outlook. If the market is valued higher, your monthly contributions via SIP would be reduced and increased again once markets are correct and valuations look attractive. Fund houses do this based on a decided valuation matrix.
BEST Systematic Investment Plans
Quant Large And Mid-Cap Fund Direct-Growth
Investing in the Quant Large and Mid-Cap Direct-Growth Fund could be a strategic move for you. With a robust presence of 10 years and 11 months since its establishment on 01/01/2013, this medium-sized fund has shown stable growth.
- Returns since inception: 19.49%
- Minimum investment: ₹ 1,000
- Lock-in period: No lock-in
- Returns (p.a): 23.17%
- Risk: Very High
- Assets under management(AUM): ₹ 1,296 Crores
- Current Value: ₹ 101.61
ICICI Prudential Technology Fund
If you’re eager on investing in tech-led companies but strapped for time, consider the ICICI Prudential Technology Direct Plan-Growth. This disciplinary mutual fund, with over a decade of experience, focuses on the Technology, Communication, Services, and Capital Goods sectors.
- Returns since inception: 22.25%
- Minimum investment: ₹ 100
- Lock-in period: No Lock-in
- Returns (p.a): 14.87%
- Risk: Very High
- Assets under management (AUM): ₹ 10,868 Crores
- Current Price: ₹ 175.46
HDFC Flexi Cap Fund
With an existence of more than 29 years, the HDFC Flexi Cap Growth Fund stands out. Launched on 08/12/1994, it has consistently outperformed its peers.
- Returns since inception: 19.07%
- Minimum investment: ₹ 100
- Lock-in period: No Lock-in
- Returns (p.a): 23.91%
- Risk: Very High
- Assets under management (AUM): ₹ 42,270 Crores
- Current Price: ₹ 1,572
Quant Tax Plan- Direct-Growth Fund
This Fund was founded on 01/01/2013 and focused the majority of its investment in the Energy, Healthcare, Financial, Metals & Mining, and Materials sectors.
- Returns since inception: 21.74%
- Minimum investment: ₹ 500
- Lock-in period: 3 years
- Returns (p.a): 20.04%
- Risk: Very High
- Assets under management (AUM): ₹ 5,615 Crores
- Current Price: ₹ 336.08
Axis Blue-chip Fund Direct Plan-Growth
Axis Blue-chip Fund Direct Plan-Growth was launched on 01/01/2013. The fund has the majority of its money invested in the Finance, Automobile, Services, Technology, and Construction sectors. It has taken less exposure in the Financial and Automobile sectors compared to other funds in the category.
- Returns since inception: 14.92%
- Minimum investment: ₹ 100
- Lock-in period: No Lock-in
- Returns (p.a): 11.79%
- Risk: Very High
- Assets under management (AUM): ₹ 30,733 Crores
- Current value: ₹ 56.13
CONCLUSION :-
SIP is a smart and disciplined approach to investment in mutual funds. It enables individuals to accumulate wealth through consistent, comfortable investments gradually. By defining precise financial objectives, creating a timeline, determining the appropriate investment sum, and seeking guidance from a financial advisor, you can realize your aspirations and secure your financial stability.