SIP

What’s in store for you

SIP

About Mutual Funds – SIP

  • Mutual Funds offer a convenient way to invest in complex financial markets. They encompass various categories like Equity Funds, Debt Funds, Floating Rate Debt Funds, and Balanced Funds. Their success is largely attributed to the key advantages they offer, like diversification, expert management, and ease of liquidity. 
  • What is SIP? 
  • Systematic Investment Plan (SIP) is an approach which involves investing a set amount at regular intervals rather than investing a larger lump sum amount in one shot. This way, you are not attempting to capture the highs and lows of the market, but rather, the cost of your investment is averaged over a period. The essence of SIPs is that when the markets fall, investors automatically acquire more units. Likewise, they acquire fewer units when the market rises. This means that you buy less when the price is high, whereas you buy more when the price is low. Hence, the average cost per unit drops down over time. 
  • Consider the following example of two rational people who each invest the same amount of money into a managed fund over a period. 
  • Investor A has decided to invest ₹10,000 now. Investor B invests through an SIP - ₹ 1000 each month. 
Month Investor A Units Purchased Investor B Units Purchased Unit Price
  (In ₹)   (In ₹)    
1 10000 1000 1000 100 10
2 0 0 1000 105.3 9.5
3 0 0 1000 114.3 8.8
4 0 0 1000 115.6 8.7
5 0 0 1000 118.3 8.5
6 0 0 1000 125 8
7 0 0 1000 117.6 8.5
8 0 0 1000 107.5 9.3
9 0 0 1000 95.2 10.5
10 0 0 1000 90.9 11
Total Investment ₹10,000 1000 ₹10,000 1089.8 Up to 50 days
Total Value ₹11,000   ₹11,988    

  • The above table shows that Investor B is better positioned by investing through a Systematic Investment Plan. At the end of the 10-month investment period, Investor A, who made a lump sum investment, has 1000 units in his portfolio that have a market value of ₹11,000. whereas Investor B, who made investments through a SIP, has 1090 units in his portfolio that have a market value of ₹11,988. 

More About Mutual Funds

  • Regular Investing: Allows investors to contribute a fixed amount regularly, typically monthly, promoting disciplined saving and investing. 

  • Affordable: Starts with low minimum investment amounts, often as little as ₹500, making it accessible to a wide range of investors. 

  • Flexibility: Offers the flexibility to increase, decrease, or pause contributions as per the investor's financial situation or market conditions. 

  • Rupee Cost Averaging: Systematically buys more units when prices are low and fewer when prices are high, potentially lowering the average cost per unit over time.  

  • Compounding Benefits: Long-term investments benefit from compounding returns, where earnings on investments are reinvested to generate additional earnings over time. 

  • Convenience: Automated payments from linked bank accounts simplify the investment process, ensuring regular contributions without manual intervention. 

You can start a SIP investment through our InvestNow platform. There are no registration fees for an InvestNow Account, and it offers easy onboarding and hassle-free payments for customers. To register:  

  • Log in to NetBanking,  

  • Go to the Mutual Fund tab  

  • Click on the InvestNow banner.  

To invest in a SIP, you must fill out the KYC form and link your Demat Account. You must also submit a cheque for the SIP amount you want to invest. These documents must ensure the investor’s identity and secure the investment process. 

*The Most Important Terms and Conditions for each of our banking offerings features all the specific terms and conditions that govern their use. You must go through it thoroughly to fully understand the terms and conditions applicable to any banking product you choose. 

Frequently Asked Questions

You can make a SIP investment by investing a minimum monthly contribution of ₹500. The minimum amount required to start a SIP (Systematic Investment Plan) in Mutual Funds can also vary depending on the fund house and scheme.

Yes, you can change the SIP amount and frequency after starting. Most Mutual Funds allow you to modify these settings according to your financial situation. You may need to complete a form or do it online through your investment platform. 

Investments in SIP plans of Equity Mutual Funds are subject to capital gains tax. Short-Term Capital Gains (held for less than a year) are taxed at 15%, while Long-Term Capital Gains gains (over ₹1 lakh) are taxed 10% without indexation benefit. Under section 80C, you can claim annual deductions of up to ₹1.5 lakh if the SIP investment is made in an Equity-Linked Saving Scheme (ELSS).

Investing ₹5000 per month in a SIP for 20 years can grow significantly due to compounding. Considering an average annual return of 12%, your investment of ₹12 lakh could grow to around ₹50 lakh. Returns depend on the fund's performance and market conditions.

No, SIPs are not risk-free, as they invest in Mutual Funds Schemes, which are subject to market risks. While SIPs can help mitigate short-term volatility through regular investing, the value of mutual fund investment plans can fluctuate based on market performance.