What is SIP?

SIP which stands for Systematic Investment plan is a smart and hassle-free way to invest in Mutual Funds. SIP is a long-term wealth building practice, this kind of investment approach -while inculcating a savings habit- is meant to coexist with and not hinder your short term finances. You invest a fixed amount regularly in mutual fund schemes for a pre-defined period of time. In SIP, an investor selects a period (3 years, 5 years or even perpetuity), intervals (weekly, monthly, quarterly etc.) and amount to invest.

What are the benefits of investing in SIP

Rupee Cost Averaging

Rupee Cost Averaging

Rupee cost averaging smoothes out the market's ups and downs and reduce the risks of investing when markets are volatile. This is the primary benefit of investing in mutual funds via SIPs. Rupee cost averaging is a phenomenon in which an investor continues to invest a particular amount at fixed intervals regardless of the share price/NAV. An investor receives more units when the NAV of a mutual fund scheme decline. Therefore, over a long period of time, the cost of units to investors will be significantly lower despite volatility.

Power of Compounding

Power of Compounding

The rule for compounding is simple - the sooner you start investing, the more time your money has to grow.
With simple interest, you earn interest only on the principal (that is, the amount you initially invested); with compounding, you earn interest on the principal and additionally earn interest on the interest. Compounding leads to an exponential increase in your wealth

Convenient & Automated

Convenience

With IIFL, you can start your SIPs in just a few taps. The process is completely paperless. Using e-mandate you can allow your bank to auto-debit your investments without having to worry about remembering dates.

Disciplined Investment

Discipline

SIP gives you flexible approach of changing investment amount/cancelling SIP/changing tenure of SIPInvestors instill discipline in their character by committing to invest in a systematic manner. It is well known that this kind of discipline is essential for long term wealth building.

Flexibility

Flexibility

All the variables involved, the amount, period and the intervals are flexible and can be tuned to one’s convenience. You also have the option to increase, decrease or stop your SIP at any time. Another major benefit of SIP is that people can redeem liquid cash by breaking the policies in case of an emergency. This benefits investors in having secure money available at their disposal whenever they require it for their use.

When should you invest in SIP?

Market timing is critical when you are investing a lump sum. However, when it comes to SIP you need not worry about timing the market due to rupee cost averaging.

One of the most popular investment mantras is that one must start early. The major reason for doing that is the benefit of compounding.

Let’s explain this with an example.
Person A starts saving a modest Rs. 500 for his retirement at the age of 23. Person B, however, starts saving 30 times the amount Rs. 15,000 at the age of 40. Assuming 20% returns, when they retire at 60 they will end up with the same Rs. 4.7Cr.

'Every drop makes an Ocean'.

Modest monthly amounts can lead to an enormous corpus given enough time. When it comes to SIPs, it is never too early or never too late.

Why should you use SIP Calculator?

To make successful and smart investments it is essential that you have an accurate idea of when and how much to expect in terms of returns. You can use SIP calculator to estimate your earnings from a periodic investment. SIP Calculator also helps you estimate the amount that you should invest monthly to build a predetermined corpus for your goals and expenses.

How does a SIP Calculator work?

There are 3 steps to use the SIP calculator effectively

  • Determining your monthly investment amount

    Understand your monthly income. Deduct all expected expenses and estimate your total saving capacity. You can also include your tax-saving investments here if you are investing in ELSS Schemes. (ELSS schemes provide returns of Equity schemes while being tax exempted)


  • Estimating a rate of return for your investment

    The First step is to determine the weights/fraction of savings into different asset classes. As a rule of thumb, take your age and subtract it from 110. The number you get is the percentage of your savings that you should invest in Equity. The rest can go into Debt and Fixed Income.

    As on Aug 2018, on average
    IIFL Recommended Equity Funds provided 24% over last 5yrs
    IIFL Recommended ELSS Funds provided 23% over last 5yrs
    IIFL Recommended Debt Funds provided 9% over last 5yrs
    Public Provident Fund provides 7.6%
    Gold provided 0.1% over last 5yrs
    Multiply your determined weights by these returns to get your expected rate of return.


  • Determining the tenure of your SIP

    When it comes to SIP investments, the higher the tenure the better. This is because your investments rise exponentially thanks to compounding.

    Eg: Your 10,000pm investment @22% will be 10.9 Lakh for 5 yr duration vs 20 Lakh for 7 yr duration.
    It is not always possible to postpone your goals, therefore it is recommended that you start your SIP early.

Reasons To Choose IIFL


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Research & News

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