Systematic Investment Plan (SIP)

What is an SIP?

SIP stands for Systematic Investment Plan. It allows you to make disciplined investments in a specific mutual fund scheme by investing fixed amounts at pre-determined intervals, which can be weekly, monthly, quarterly, semi-annually, or annually. Most mutual funds in India allow you to make SIP investments with as low as Rs. 500 per month.
 

By investing in mutual funds through SIP, you can make recurring investments without worrying about the market dynamics. These investments keep accumulating and, with the power of compounding and rupee cost averaging, snowball into a significant corpus over the long term. To determine the approximate return you can generate through an SIP, you can use an online SIP calculator calculator.

How Does SIP Work?

When you sign up for an SIP investment(s), you allow the Asset Management Company (AMC) to debit a fixed amount from your bank account on a particular date every month. This amount is then automatically invested in the selected mutual fund scheme. Upon successful investment, you are allotted mutual fund units as per their Net Asset Value (NAV) on the investment date.

The NAV per unit of a mutual fund scheme is calculated by dividing the total market value of the securities in which the money has been invested by the total number of active units on the given date. The NAV of a mutual fund scheme keeps fluctuating based on the performance of the underlying assets.

So, every time you invest in SIP, the purchased units are added to your mutual fund account as per the prevailing NAV. During a bullish market, the NAV can be on the higher side, resulting in the purchase of a lesser number of mutual fund units and vice versa. These units accumulate to form a large corpus over the long term.

Let’s understand this through an example. Suppose you’re investing Rs. 10,000 per month in a mutual fund scheme through an SIP. Here’s how you will purchase mutual fund units:

So, after six months, you would invest Rs. 60,000 through SIP and purchase 1,172.76 units of mutual funds. Your average cost of purchase would be Rs. (60,000/1172.76), i.e., Rs. 51.16.

List of Best SIP Funds in India

Below is a list of the best SIP mutual funds in India. We have hand-picked these funds based on their annualized returns over the last five years. You can make SIP investments in these funds to create the desired corpus for your mid to long-term financial goals. 
 

1. Quant Active Fund
 

2. Quant Large and Mid-Cap Fund
 

3. Parag Parikh Flexi Cap Fund
 

4. Quant Focused Fund
 

5. Edelweiss Large and Mid-Cap Funds
 

6. Kotak Equity Opportunities Fund
 

7. Mirae Asset Emerging Bluechip Fund
 

8. PGIM India Flexi Cap Fund
 

9. Canara Robeco Emerging Equities Fund
 

10. DSP Flexi Cap Fund
 

Investing in these mutual fund schemes through a Systematic Investment Plan (SIP) can help you plan your financial goals efficiently. You can start your SIP with as low as Rs. 500 per month and gradually increase it to create the desired corpus. SIP works best when you stay invested for a long term of five to ten years or more. Explore SIP at 500 to learn more.

Benefits and Features of SIP Investment

Systematic Investment Plan is a popular choice for long-term financial goals among investors. Here are the benefits of SIP-

• Encourages disciplined saving by allowing regular small investments.
• Reduces market timing risks and minimises the impact of volatility.
• Harnesses the power of compounding, increasing wealth over time.
• Offers flexibility to adjust or stop investments as needed.
• Provides diversification, spreading risk across various assets.

Methods to invest in SIP

There are two ways to invest in mutual funds - the SIP method or the one-time lump sum method. Rookie investors often get confused about whether they should opt for the SIP route or make one-time investments. 

Investing through the SIP mode has several benefits, as mentioned above. The most notable advantage is that you’re not required to time the market. You can invest a fixed amount every month, and your cost of purchase gets averaged out in the long term. Also, you can start an SIP with as low as Rs. 500 and make recurring investments to create a large corpus for your long-term financial goals.

On the other hand, one-time investments can lead to severe losses during bearish markets. Also, it becomes necessary for the investor to time the market. That is why it’s always better to opt for the SIP route to invest in mutual funds.

How to Invest in SIP through Moneyfy?

Tata Capital’s Moneyfy platform allows you to start SIPs in one or more mutual fund schemes of your choice from the convenience of your home or office. You can also compare past performances of various mutual funds and select the best ones to support your financial goals. Below are the steps you need to follow to start an SIP through Moneyfy:

Step 1 - Visit the Moneyfy website or download the Moneyfy app on your smartphone.

Step 2 - Complete your e-KYC and upload the required documents to open your investor account.

Step 3 - Select the mutual fund scheme in which you want to make SIP investments.

Step 4 - Enter the SIP amount and select the date on which you want to make your investments.

Step 5 - Sign up for an auto-debit mandate to allow the mutual fund company to deduct the SIP amount from your bank account on the selected date every month.

What are the Documents Required for SIP Investment?

You must submit or upload specific documents to open your investor account with Moneyfy and start an SIP in the desired mutual fund scheme. The list of documents you need to submit is as follows:
 

• KYC Documents - PAN Card and Aadhaar Card

• Canceled cheque

• A valid address proof such as an Aadhaar Card, Driving License, Voter ID Card, or utility bills

   

Please note that this list is indicative, and you may require some additional documents to open your account. The activation of your investor account is subject to successful verification of your documents.