Power of SIP : systematic investment plan

When you are chasing a dream, you need a systematic and planned approach for your investments to achieve it.

A Systematic Investment Plan (SIP) is a method that allows you to invest a fixed sum, regularly, in a mutual fund scheme. It is just like a recurring deposit with the post office or bank where you put in a small amount at regular intervals.

A SIP is designed to allow you to buy units on a given date every month / quarter, thus allowing you to implement an investment / saving plan for yourself. You can even begin with as low as Rs.100/- every month. It eliminates the desire to try and time the market, which can prove to be quite disastrous, and inculcate a disciplined approach to investing which has always proven to have better outcomes as is demonstrated in the illustrations below.

Once you have decided upon the fund to invest in, the amount you want to invest and the frequency, you can either issue post-dated cheques or an ECS instruction. And, your systematic investments will be taken care of automatically.

WHAT ARE THE ADVANTAGES OF SIP?

Small Investments Amounts - Making The Numbers Game Work For You SIP gives you the power to achieve your long-term financial goals by inculating a strict discipline of investing fixed amounts at regular intervals Assuming that you invest Rs.5,000/- on the first working day of every month in a fund: Tenure Total Investments (INR lakhs) What Your Investments Will be Worth (INR lakhs) (% CAGR) 10% 15% 20% 3 years 1.80 2.08 2.25 2.43 5 years 3.00 3.87 4.42 5.08 10 years 6.00 10.24 13.76 18.80 Disclaimer: The example above is illustrative in nature and should not be construed as investment advice. The trend of such returns may / may not be uniform during the SIP period and / or in future. It does not in any manner imply / suggest performance of any scheme of BNP Paribas Mutual Fund.

Rupee Cost Averaging - Eliminates The Need For Timing The Market SIPs are designed to try and cushion you from market volatility. It buys you more number of units when the NAVs are down and less units when NAVs are high. Thus, keeping your average purchase price lower.

A disciplined and systematic investment approach can go a long way in ensuring that you realize your dreams. As always, it is advisable to seek professional services of an advisor to help you identify your financial goals and work out an optimum plan.