Benefits of Systematic Investment PlanRegular Investment
Systematic Investment Plan is, as the name suggests, regular investment where you invest fixed amounts every month in any of the funds. SIP is a means of investing in a disciplined manner irrespective of the state of the market.Power of Rupee Cost Averaging
SIP works on the principle of "Rupee Cost Averaging" wherein you invest a fixed amount every month, irrespective of the market movements. In this way, you would buy more units when the market is bearish and take advantage of higher appreciation when the market moves up. Thus, your Average Cost per Unit works out lesser than the Average Price per Unit. Let us look at this more closely through an example.
||Amount Invested (Rs.)
||Purchase Price (Rs.)
Average Cost per unit comes to be Rs. 9.95
SIPs work better, as opposed to one-time investing. This is because of rupee-cost averaging, where an investor typically buys more mutual fund units when prices are low. On the other hand, he will buy fewer mutual fund units when prices are high.Power of Compounding
The early investor accumulates greater wealth vis-à-vis the investor who comes in later. This is mainly due to a thumb rule of finance called the "Power of Compounding Returns"
As shown in the illustration below, if one starts investing Rs.1,000/- per month at an 8% annual return from the age of 25, then by the age of 60, one would have accumulated Rs. 23,09,175/-. But if one starts investing only from the age of 30, then at age 60, one would accumulate only Rs.15,00,295/-. A headstart of only 5 years results in a 54% larger investment corpus.
Lower Minimum Investment
|Age at entry
||No. of years of investment
||Total amount saved (Rs)
||Value at age 60 (Rs)|
If you make a one-time investment in a mutual fund scheme, the minimum amount that you have to invest is Rs. 5,000/-. Alternatively, if you invest via an SIP, the amount drops to as low as Rs. 500/- per month.Convenience / Ease of Investing
It is very easy to invest in SIPs. All you have to do is visit the JM Financial Mutual Fund office in your city. Alternatively, you can approach any office of Karvy Computershare - our registrar and transfer agents, or an AMFI certified Financial Consultant.
SIPs can be operated by simply providing post-dated cheques with the completed enrolment form or by giving ECS instructions. The cheques can be banked on the specified dates and the units credited into the investor's account.
If the market volatility gives you the jitters, just take advantage of JM Financial Mutual Fund's SIPs.