instalment investment - icici...
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SIP or Systematic Investment Plan offered by Mutual Funds is like a GOOD EMI
EMI Instalment
= GOOD EMI Investment
=
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WHAT are SIPs?
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SYSTEMATIC INVESTMENT PLANS (SIPs) MADE SIMPLE
WHAT WHYWHEREWHENWHAT
are SIPs? SIPs?
to invest via SIPs? to start a SIP? not to do in SIPs
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WHAT are SIPs?
Ÿ
investing in mutual funds
Ÿ
similar to a Bank Recurring Deposit- Regular investment in one or multiple schemes
ŸSIPs or Systematic Investment Plans are one of the
SIPs are a way of REGULAR AND DISCIPLINED
INVESTING PROCESS
BEST WAYS TO INVEST IN A MUTUAL FUND
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WHY SIPs?
ŸCHEAPER ON THE WALLET
ŸREGULAR AND DISCIPLINED INVESTMENT
Ÿ CREATE WEALTH OVER LONG RUN
ŸMAKE MARKET TIMING IRRELEVANT
Ÿ BENEFITS OF COMPOUNDING
- Can be as low as R 500 per SIP per month
Potential To
- Ensures that one invests at all points of time (high as well as low points of the market)- Benefits from Rupee Cost Averaging
Provide
Let us look at some of the above aspects in detail…..
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WHY SIPs?
CREATE WEALTH OVER LONG RUN
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Create Wealth Over The Long Run(Illustration)
Period Principal R lac
Final Value R lac
@ 10% p.a.
Final Value R lac
@ 12% p.a.
Final Value R lac
@ 14% p.a.
10 years 1.20 2.07 2.32 2.62
15 years 1.80 4.18 5.05 6.13
20 years 2.40 7.66 9.99 13.16
25 years 3.00 13.38 18.98 18.98
^ *SIP of growing @ 10%, 12% & 14% p.a.R1000 per month
A small difference of even 2% in returns can change the final amount drastically
* For Illustration purposes only. These are assumed returns and actual returns may vary. Also, returns may vary with the type of underlying asset class. ^ Systematic Investment Plan at the beginning of the month.
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RUPEE COST AVERAGING
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Rupee Cost Averaging
Receive when ,vice versa when NAV is higher
more units NAV is lower
Investment (A) NAV (B) No. of Units (A / B) Remarks
R 10000 20 500 Higher NAV ~ Less Units
R 10000 16 625 Lower NAV ~ More Units
Average Cost per unit 17.78
− The cost is thus averaged out as NAV falls
• Longer the SIP period, better the impact of rupee cost averaging• Longer SIP period may also help to lower volatility of returns
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Rupee Cost Averaging (Illustration)
Past performance may or may not be sustained in futureFor a 20-year SIP in S&P BSE Sensex ending on Jan 31, 2017. Investment at the start of the monthSource-CRISIL Mutual Fund Research Tool
How cost per unit has dropped over long investment horizon
S&P BSE Sensex
Ending Value 27,656
Average Value 7011
SE
NS
EX
VA
LU
E
Starting Value 3382
0
5000
10000
15000
20000
25000
30000
31-J
an
-97
31-J
an
-98
31-J
an
-99
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31-J
an
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31-J
an
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an
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Sensex rose fr
om 3382 on Jan 31, 1997 to 27,656 on Jan 31, 2017
Average cost of a unit o
ver the 20-ye
ar period was only R
s.7011
BUT
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BENEFITS OF COMPOUNDING
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Benefits of Compounding (Illustration)
Longer you stay the wealthier you may be
SIP of R 1000 per month growing @12% p.a.*
Experience the Magic of COMPOUNDING
Period Principal R lac
Final Value R lac
Growth of Principal (Compounding Effect)
10 years 1.20 2.32 almost 2 times
15 years 1.80 5.05 almost 3 times
20 years 2.40 9.99 over 4 times
25 years 3.00 18.98 over 6 times
* For Illustration purposes only. These are assumed returns and actual returns may vary. Monthly investment at the beginning of the month.
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WHERE to invest via SIPs?
NO RESTRICTION OF ANY ASSET CLASSfor commencing a SIP
MORE POPULAR FOR EQUITY as an asset class because…− The asset class is relatively more volatile and − SIPs help to even out volatility by purchases made across market cycles
EQUITY SIPs ideally should be long term of 5 years and above
SIPs IN FIXED INCOME may be for short to medium term
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FUND HOUSEand its
Points of Presence
INTERMEDIARYBank, Distributor,
Independent Financial Advisor (IFA)
ONLINE Through
*investment portals* of Fund House/ Distributors
Key Step is KYC or Know Your Customer form
KYC form available with mutual fund, distributors, RTA or KRA (KYC Registration Agency)
Three Modes to Invest
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WHEN to start a SIP?
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WHEN to start a SIP?
NO PARTICULAR TIME TO START A SIP
SIPs actually make market timing irrelevant- Regularity and consistency is more important than timing -
FREQUENCY OF SIPS is typically monthly or quarterly - Monthly SIPs are more popular- SIP date needs to be predefined
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WHAT not to do in SIPs (Illustration)
Delay or discontinue a SIP
Target of @12% p.a.*R 1 crore at Age 60
An Early Start is Good
Every Delay 5 Year Doubles Monthly
Investment needed
Start Age Monthly Investment R
25 years 1540
30 years 2833
35 years 5270
40 years 10009
45 years 19819
Only needed if you start at 25 years butif you start 5 years later and so on
R 1540 p.m. R 2833 p.m.
* For Illustration purposes only. These are assumed returns and actual returns may vary. Monthly investment at the beginning of the month.
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Start your GOOD EMI today!