The benefits of SIP or Systematic Investment Plans range from rupee cost averaging, to Power of Compounding to inculcating the habit of saving to name a few. Investors today are always searching for the Top SIP, or the best systematic Investment plan to invest in. There are various SIP calculators available in the market that try and help investors make investment plans. But before choosing the best SIP or the best SIP Mutual Fund, those Investing must know the benefits of taking the route of the SIP.
Rupee cost averaging or dollar cost averaging (as it’s known internationally) is a technique used to invest money in the stock market at regular intervals of time (mostly monthly). Since investors sign-up for a long-term investment plan, by virtue of the fact that investing continues during the bad cycles of the stock market, investors are able to “buy low”. For lump sum investments, most investors when they see a falling market or a bad phase, they defer their decisions to invest. During these periods a SIP continues its investing and ensures that the investor gets the benefit of a falling market.
Another benefit of a systematic investment plan(SIP) is that by nature it is a long-term investment plan. Typically, a SIP can be taken for even 10, 20 or 30 years and it can a really long-term investment plan. The minimum tenure for a SIP can be as low as 6 months. However, since a systematic investment plan is used as a savings tool, it is a structured as a long-term savings plan with a tenure of many years.
It is well known that “it is not market timing that makes money, but the amount of time that you spend in the market”. With the invested amount increasing over time, the accumulated amount keeps on increasing and this being invested in the market would be subject to market growth and returns. The power of compounding is a benefit of SIPs that the investor realises over the long term when his/her investment period is maturing.
A big benefit of SIPs is that it allows one to participate in the share market at very low amounts.The minimum investment amount in a systematic investment plan can be as low as 500 rupees (though some Mutual Funds companies allow for even INR 100). With such a low investment amount being a threshold, this makes investing into a SIP within the reach for most individuals earning money.
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Convenience is one of the biggest benefits of a SIP. A user has to sign-up one-time and go through documentation. Once done, thereafter debits for subsequent investments take place automatically and the investor just has to monitor the investments.
Another benefit of SIPs is that prospective investors see it as a tool that inculcates savings. With a low investment amount, systematic nature and one-time registration it becomes a method of forced saving.
So, the next question which comes in is,
One can use the services of a financial planner/expert or one can use the various online providers of such services or go directly to the fund house. One needs to do some basic research before choosing which SIPs to invest in. Using a sip calculator one can decide the amount to invest in for a certain goal, using such an approach one would create a corpus for the long term.
The Best SIP Plans to invest in India are:
Fund NAV Net Assets (Cr) Min SIP Investment 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) 2019 (%) DSP BlackRock US Flexible Equity Fund Growth ₹31.7107
₹250 500 6.8 25.7 22.2 14.4 13.4 27.5 Franklin Asian Equity Fund Growth ₹27.5493
₹181 500 8.6 24.3 22 8 12.4 28.2 SBI Small Cap Fund Growth ₹58.4498
₹5,321 500 16.7 32.3 11.8 4.2 12.5 6.1 Kotak Equity Opportunities Fund Growth ₹128.819
₹3,757 1,000 8 24.7 7.6 4.1 9.1 13.2 Principal Emerging Bluechip Fund Growth ₹110.77
₹2,119 100 10.7 25.1 6.8 1.1 9.7 6.8 Mirae Asset India Equity Fund Growth ₹53.429
₹18,450 1,000 9 26.2 3.5 5.1 10 12.7 Tata Equity PE Fund Growth ₹137.855
₹4,454 500 8.9 27.9 2.8 0.2 10 5.3 IDFC Tax Advantage (ELSS) Fund Growth ₹54.37
₹2,228 500 10.2 30.5 2.4 -0.1 7 1.9 L&T India Value Fund Growth ₹35.549
₹6,310 500 10.3 30.1 2.4 -0.7 6.8 4.6 Invesco India Growth Opportunities Fund Growth ₹35.84
₹2,960 100 9.4 23.4 1.6 4.8 9 10.7 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 16 Oct 20
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In conclusion, SIPs offer a great way for retail investors to save money for the long term. While the returns generated over the long term against lump sum investments may be better also (may not be also!), however, they still remain a great tool to save money and reduce the risk of investing.
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