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Mutual Fund Basics | Systematic Investment Plan | Mutual Fund Glossary

Systematic Investment Plan

You can give your child the best education she/he deserves without a worry by just investing Rs 3,000 every month. Or get around Rs 30,00,000 or more for your daughter’s wedding by investing Rs 3,000 every month.

You can give your child the best education she/he deserves without a worry by just investing Rs 3,000 every month. Or get around Rs 30,00,000 or more for your daughter’s wedding by investing Rs 3,000 every month.

Let the magic of compounding, along with a sound investment advice from Arihant, work for you. Create wealth through Systematic Investment Plan of good-performing mutual fund schemes.

No matter how you choose to invest to create wealth, one thing is sure, the earlier you start the better off you will be. When you start early, your investment and returns start compounding year-by-year making your money work harder for you.

Stock markets are like English weather, unpredictable. Investors often lose money in trying to time the market or riding on the greed and fear ride. So is it possible to make money from the market despite the volatility? The good news is ‘YES IT IS’. You need two things to make the market work positively for you:

  • Stay invested for the long-term
  • Adopt a disciplined and systematic approach to investing

And through Systematic Investment Plan (SIP) you will be able to follow the above two vital principles of investing.

You must be wondering, what is a SIP?

A SIP is a vehicle offered by mutual funds to help you save regularly and at the same time it invests those savings to build wealth. To explain it simply, it is like a recurring deposit with the bank wherein you put a fixed amount of money every month, but the difference being, in SIP the money goes into the mutual fund.

Investing through SIP will empower you to plan and save for your future by inculcating in you a disciplined habit of investing that should bring you closer to achieving your financial objectives.

To know more about SIP, its benefits and how it works download the Arihant SIP Guide

 

Why SIP?

A Systematic Investment Plan works for you in three ways

  • It helps you to save regularly and thus inculcates a sense of discipline
  • It harnesses the power of compounding
  • It is the best possible way you to reign in impulsive buys-and-sells that otherwise one is gripped by in times of market volatility. - Rupee cost averaging

 

Power of Compounding

When you invest every month, not only you generate returns on your capital, but through a SIP, you generate returns on your returns as well. Sounds confusing?

Suppose you invest Rs 3,000 every month and in first month you get a 5% return, so the next month your total amount invested in the mutual fund will be Rs 3,150 plus the other Rs 3,000 you will put at the start of second month. So your fund manager has to now generate returns on Rs 6,150 not Rs 3,000. The same cycle carries month-after-month till you stay invested.

See how the power of compounding will work for you:

When you invest Rs 3,000 every month for 20 years in the Systematic Investment Plan of mutual fund scheme, assuming that you get 12% return per annum*, you accumulate Rs 30,00,000 after 20 years. See below how your Rs 3,000 every month grows year-by-year.

How the Power of Compounding works for you*

Yr (in Rs) Yr (in Rs) Yr (in Rs) Yr (in Rs)
1th 38,427 6th 3,17,271 11th 8,23,844 16th 17,44,135
2nd 81,730 7th 3,95,937 12th 9,66,756 17th 20,03,762
3rd 1,30,523 8th 4,84,580 13th 11,27,793 18th 22,96,317
4th 1,85,504 9th 5,84,464 14th 13,09,254 19th 26,25,976
5th 2,47,459 10th 6,97,017 15th 15,13,728 20th 29,97,443
*The returns are calculated at an expected 12% rate of return per annum from equity mutual funds in India, although the average return of top ranking diversified mutual funds in India, for the last 10 years, has been more than 35% per annum.

Arihant’s research team will work with you in identifying ace schemes that will help you fund for your child’s education or your daughter’s wedding or any other financial dreams you have.

Arihant is an AMFI registered mutual fund distributor offering MFs of all the fund houses in India. We have a research team that monitors and analyses mutual fund schemes regularly and provides investment recommendation based on thorough analysis.

To get started, call our mutual fund executive today at 022-42254843/44 or email us on mutualfund@arihantcapital.com for more details or to get started.


 

To learn more about Systematic Investment Plan, download SIP guide

 

 

 

Dream HouseRs 3,000 invested every month for 26 years will give you Rs 1.15 crore to buy your dream house.

 

Dream CarRs 3,000 invested every month for 10 years will give you Rs 8.4 lakhs for the dream car you want.

*returns calculated at an expected rate of return of 15%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

When asked to nominate the most powerful force on earth, Albert Einstein is reputed to have answered ‘compound interest’.