25-year-old Abhay found himself in a predicament. He was only a\nfew months into his first job, and a major portion of his paycheck went towards\nmeeting his recurring expenses like rent, utilities, and EMIs. At the end of\neach month, Abhay had around Rs. 2,000, which was enough to save up, but not\nenough to invest. Or so he thought, until a friend at work told him about an\neasy way to invest in mutual funds with whatever he could save up each month.<\/p>\n\n\n\n
Abhay discovered that this rewarding investment strategy was\nknown as a Systematic\nInvestment Plan (SIP).\nIt seemed promising, but being conscientious and methodical, he decided to read\nup a little more about SIPs\nand understand the power\nof a Systematic Investment Plan before adopting that strategy. Let\u2019s\ntake a look at what he discovered.<\/p>\n\n\n\n
What is a Systematic Investment Plan?<\/strong><\/p>\n\n\n\n SIP is an investment strategy where\nyou invest a fixed sum of money at regular intervals, similar to a recurring\ndeposit scheme. Generally, most Systematic Investment Plans are associated with investment in\nmutual funds. An SIP\ncan therefore be used to invest in debt funds, equity funds, and hybrid funds\nas well.<\/p>\n\n\n\n One of the main reasons why Systematic Investment Plans are rising in\npopularity is that they are extremely customizable. Right from the amount of\nmoney that you invest to the period as well as the frequency of investment,\nevery aspect of the plan can be customized according to your needs. You can\ntake into account various factors like your investment budget, your long-term\ngoals, and your risk profile before starting your SIP. If you\u2019re a new\ninvestor, you\u2019ll find the Moneyfy app from Tata Capital from easy to use.\nSetting up an SIP on the Moneyfy app is also smooth and straightforward, thanks\nto the crisp and fuss-free user-interface. <\/p>\n\n\n\n In Abhay\u2019s case, he started his SIP considering his investment\nbudget, which came up to Rs. 2,000 each month. Over the course of 1 year, he\nsucceeded in growing his investments by around 10%, which was more than what he\nwould have earned by merely saving up. Like Abhay, you too can reap rich\nrewards in the long-term using a proper Systematic Investment Plan. <\/p>\n\n\n\n What makes a Systematic\nInvestment Plan so powerful?<\/strong> <\/p>\n\n\n\n The power of\na Systematic Investment Plan lies in the fact that it utilizes the\nconcept of rupee cost averaging. Let’s take a brief look at this concept to\nbetter understand the full power\nof a Systematic Investment Plan. <\/p>\n\n\n\n Additional Read<\/strong>:- Is ELSS a Wealth Creation & Tax-Saving Tool? <\/a><\/p>\n\n\n\n What is rupee cost averaging?<\/strong><\/p>\n\n\n\n When you invest in mutual funds, you can either choose to park a\nlump sum amount in the fund of your choice at one go, or you can adopt an SIP,\nwhere you invest a fixed sum at periodic intervals regularly. When you opt for\nthe lump sum investment option, your cost remains fixed at whatever price you\npurchase the mutual fund units. However, when you opt for an SIP, you\nultimately reduce the cost of your investment considerably. <\/p>\n\n\n\n For instance, let\u2019s assume you make a lump sum investment of Rs.\n10,000 in a mutual fund scheme whose NAV is Rs. 20. The number of mutual fund\nunits that you can get with that lump sum investment is 500, with the per unit\ncost being Rs. 20.<\/p>\n\n\n\n However, here\u2019s what Abhay did when he adopted a Systematic Investment Plan,\nwherein he invested Rs. 2,000 each month. Let\u2019s take a look at the first 5\nmonths of his investment plan.<\/p>\n\n\n\n As you can see, Abhay\u2019s SIP easily brought down the cost per unit to Rs.\n18.87, which is less than the cost he would have incurred using a lump sum\nstrategy. This is because he got to purchase more mutual fund units at\ndifferent NAVs each month.<\/p>\n\n\n\n Other benefits of a Systematic Investment Plan<\/strong><\/p>\n\n\n\n The power of\na Systematic Investment Plan is not limited to rupee cost averaging\nalone. Here are some other benefits that you can reap by implementing such an\ninvestment strategy.<\/p>\n\n\n\n Additional Read<\/strong>:- SWP- Your Solution for Systematic Withdrawal<\/a><\/p>\n\n\n\n Conclusion<\/strong> <\/p>\n\n\n\n All things considered, the SIP option is one of the easiest and most convenient investment strategies for new investors who wish to start small. It\u2019s also highly useful for people who do not have a lump sum amount to invest in one go. If you\u2019re just venturing into the world of mutual funds, consider adopting this strategy. Like Abhay, you too could find its benefits very useful. To get started, download the Moneyfy mutual fund app<\/a>, which makes mutual fund investments easy and seamless. You can start your SIP using the app itself, and by investing regularly in a disciplined manner, you can meet your financial goals without any trouble. <\/p>\n\n\n\n\n <\/strong>\n <\/td> \n Investment amount (Rs.)<\/strong>\n <\/td> \n NAV (Rs.)<\/strong>\n <\/td> \n Number of mutual fund units <\/strong>\n <\/td><\/tr> \n Month 1 \n <\/td> \n 2000\n <\/td> \n 20\n <\/td> \n 100\n <\/td><\/tr> \n Month 2\n <\/td> \n 2000\n <\/td> \n 25\n <\/td> \n 80\n <\/td><\/tr> \n Month 3\n <\/td> \n 2000\n <\/td> \n 16\n <\/td> \n 125\n <\/td><\/tr> \n Month 4\n <\/td> \n 2000\n <\/td> \n 16\n <\/td> \n 125\n <\/td><\/tr>\n \n Month 5\n <\/td> \n 2000\n <\/td> \n 20\n <\/td> \n 100\n <\/td><\/tr>\n \n Total number of mutual fund units purchased in 5 months<\/strong>\n \n\n <\/td>\n \n\n <\/td>\n <\/td>\n \n 530<\/strong>\n <\/td><\/tr> \n Cost of each mutual fund unit:<\/strong>\n <\/strong>
\n (Total investment amount divided by the total number of units)<\/strong>\n <\/td>\n \n <\/td>\n \n <\/td>\n \n Rs. 18.87<\/strong>\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n \n