phone recharge. Well, that ... SIP allows you to invest smartly - buy more units at lower NAV and vice versa. ... A fixe
Are your concerns holding you back from investing?
SIP is your solution!
I DON’T KNOW WHERE TO INVEST I don’t understand the market My friends have lost money in the stock market.
You have a long line-up of financial goals. You are conscious of the fact that you need to invest to be able to build wealth. However, you are not quite confident about your abilities as a stock picker!
You’re right! Leave it to the mutual funds, managed by professionally trained fund managers.
Perhaps, the markets are rigged! It’s better to stay away from anything I don’t fully understand.
Besides, they are well-regulated, transparent and tax efficient. You need not track the net asset value (NAV) of your investments on a daily basis.
Use professionally-managed mutual funds.
I DO NOT HAVE A SURPLUS TO INVEST! You may have a perennial liquidity crunch, thanks to the burden of EMIs among all the routine and some not-so-expected expenses to take care of, leaving you with little or no surplus to invest. You may be postponing your investment decision for want of investible funds, and losing out on some great investment opportunities along the way!
What if you’re told that you no longer need a one-time investment and can instead invest on a pay-as-you-go basis? Quite similar to a periodic mobile phone recharge. Well, that sounds doable! But how?
Investors who cannot afford to invest a huge amount in one go need the flexibility to invest in periodic instalments.
SYSTEMATIC INVESTMENT PLAN (SIP) COMES TO YOUR RESCUE SIP is the pay-as-you-go scheme of mutual funds. Systematic investing helps those who do not have one time lump sum to invest in a chosen investment, but have the regular income to spare a certain sum every month. SIP is an option through which the investor can decide to invest a fixed amount on a monthly basis for a fixed period in the scheme(s) of his choice. You can start with an amount as low as Rs. 500 a month!
You will find it much easier to spare a smaller amount every month. It sounds more practical than waiting for that elusive lump sum!
I WANT TO BUY LOW AND SELL HIGH. WHAT PRICE IS THE ‘RIGHT’ PRICE TO BUY? Equity markets are volatile and typically move in a cycle. They go up, peak, go down, bottom out and then another cycle begins. You want to buy low and sell high but you are unable to figure out the low and the high.
Month 1 2 3 4 5
Amount you invest Rs. 5,000 Rs. 5,000 Rs. 5,000 Rs. 5,000 Rs. 5,000
NAV Rs. 10 Rs. 12 Rs. 10 Rs. 8 Rs. 10
No. of units 500 417 500 625 500
A fixed amount is invested monthly through SIP. More units are purchased when a scheme’s NAV is low (during market low) and fewer units when the NAV is high (during market up). Isn’t this exactly what you always secretly hoped for as an investor?
SIP allows you to invest smartly - buy more units at lower NAV and vice versa. It makes the market cycles work in your favour.
THE MARKET SEEMS TOO HIGH. IS THIS THE RIGHT TIME TO INVEST? I’LL INVEST LATER... You sometimes wait on the sidelines, hoping for a market correction to enter the market. Your profits ultimately will be computed based on your cost (or purchase price).
Rs. 12
In case of SIP, each of your instalments will come at the prevailing NAV. Over a market cycle, the NAV will move up or down along with the market.
WHEN SHOULD I INVEST?
Avg. cost Rs. 9.8 Rs. 8
In case of SIP, each instalments will acome at the Therefore, the average cost of foryour an SIP investor over longer timeprevailing NAV. Over a market cycle, the NAV will move up or down along with the market. period will be effectively lower. The concept is commonly referred Therefore, the average cost for cost an SIP investor The overlonger a longer effectively lower. The concept is to as rupee averaging. thetime timeperiod frame,will thebelarger referred to as “rupee cost averaging”. The longer the time frame, the larger are are thecommonly benefits of averaging. the benefits of averaging.
With SIP, market timing becomes irrelevant for a long term investor. The investor is shielded to some extent from the fear of fall as against that of a one-time investment.
I WANT TO TAKE A HOLIDAY. LET ME SKIP INVESTING FOR THE NEXT 6 MONTHS. Save now to be able to spend later. SIP brings the discipline in your investment approach to enable you to do that. It helps you inculcate the habit of saving and building wealth for your financial goals, month after month, year after year.
You may have multiple dreams and each dream requires its own plan!
HIGHER EDUCATION
FOREIGN HOLIDAY
CAR
RETIREMENT
For different requirements you can have separate SIPs, depending upon different goals and time horizons.
SIP brings in the discipline and the rigour of allocating a fixed amount every month towards your goals.
WILL MY SMALL AMOUNTS GROW INTO BIGGER GOAL AMOUNTS? Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. It is clear that the longer the horizon, the larger the benefits.
Anil started a Systematic Investment Plan (SIP) of
Rs. 5,000
per month in a diversified equity fund
He invested
Rs. 18 Lakh
Age 60 years
30 years
Investments would be worth approx.
over the next
Age 30 years
Assuming a CAGR of
15%*
Rs. 3.5 cr. at the time of retirement
% Therefore, given the power of a long time horizon, both rupee cost averaging and compounding benefits will allow your investments to grow. *The assumed rate of return is used only to explain the concept of Power of Compounding. It does not forecast or guarantee the returns given by any mutual fund scheme or any other investment instrument or asset class.
Give your investments the long time period they need to compound and watch them grow into a sizeable corpus.
THE MARKETS ARE FALLING! I WANT TO REDEEM! Focus on your goal rather than market levels.
In your investment journey, it is a given that markets will correct many times. They are cyclical. You may be prone to regret and fear. But remember that market corrections will give you the opportunity to accumulate more units, which will appreciate in value when the market cycle turns. Do not discontinue your SIPs when the markets correct and you will be on your way to achieving your financial goal. If you do, you might find it extremely difficult to enter back and you will miss the bus.
Cut out the emotion from your investing decisions. Stay the course with SIP, irrespective of market conditions.
BUILD IT UP OVER THE YEARS Depending on your risk appetite and income levels, you may have started your SIP from say Rs. 500. Each year you might want to consider increasing the investment amount, if your income levels permit.
Gradually build your portfolio by topping up your SIP amount.
HOW TO GO ABOUT STARTING SIP? Linking your SIP to a goal is the key to building wealth. So arrive at an amount you would like to accumulate as your financial goal. The rest follows easily - your investment horizon, SIP amount and the frequency. It is very simple and straightforward to operate an SIP. After the initial account opening it can work automatically through a standing instruction.
1. Determine your goal value in rupee terms
2. Choose a suitable fund with the help of your financial advisor
3. Decide your investment horizon
4. Choose the date of SIP
5. Decide your SIP amount
6. Set a frequency for your SIP
7. Submit your application and get started.
To start or to know more contact your financial advisor or give a missed call at 92218 92218.
The information provided herein is solely for creating awareness and educating investors. Readers are advised not to act purely on the basis of this information but also seek professional advice from experts before taking any investment decisions. Neither HDFC Mutual Fund nor HDFC Asset Management Company Limited nor any person connected with them accepts any liability arising from the use of this information.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
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