SIP - SYSTEMATIC INVESTMENT PLAN
How does it
work?
What is a SIP?
Person is able to
Disciplined way of invest a set amount at
investing in MF's on the regular intervals
principle of regular which is debited from
investments their bank account
How much can you How often can it
start with - minimum? be done?
SIP can be done daily,
It can be started with an
weekly, monthly or on
amount as lows as Rs
quarterly basis
100
SIP - ADVANTAGES
Rupee Cost
Averaging
Discipline
No need to time the
Helps to invest a fixed market, over a long
amount regularly period you benefit
from the fluctuations
Power of Convenience
Compounding
Very easy to do, auto
debit facility. Money
More time in the market
moves out of your
- SIPs compound over
account as instructed
time and so does your
value
SIP - SEE IT TO BELIEVE IT
By doing SIPs - you don't need to time the market
It helps to smoothen the impact of any market volatility
In most cases helps investors to buy more units at a lower price over the
long term
You don't need to think about how much to invest and when to invest
See the below example - if the investor would have put Rs 12k in Month 1 at a NAV of Rs
23, they would have got 521.7 units vs 601 through the SIP route.
Remember this is not always the case, the NAV in Month 1 could have been Rs 18 also,
therefore its important to do SIP's for a longer period of time 3-5 yrs to really take advantage
of Rupee Cost Averaging
*Table source - DSP Mutual Fund #SimplifyWithRitesh
STP - SYSTEMATIC TRANSFER
PLAN
When should you
What is it? do it?
Investor puts lumpsum When you have a
in a scheme which is lumpsum and do not
then regularly want to invest at once
transferred into another in volatile markets
scheme
How does it work? Remember
Investor puts a STP is a risk mitigation
lumpsum usually in a strategy to optimize
debt fund and regularly returns and not
transfers set amount necessarily maximize
into another scheme for profits
long term returns #SimplifyWithRitesh
STP - WORKING EXAMPLE
An investor has Rs 6 lacs and does not want to invest in
one go. He also does not want to keep this money in
savings else he/she would spend it. So they start an STP!
Fund A Fund B
Rs 25k per month
Rs 6 lacs lumpsum
transferred for a
invested
period of 2 years
Axis Liquid Fund
Axis Blue Chip
(Debt)
Fund (Equity)
Over time value of Fund Over time value of Fund B
A decreases potentially increases
#SaturdayMoneySimplifier
SWP - SYSTEMATIC WITHDRAWAL
PLAN
What is it? When should you
It is the opposite of SIP, do it?
wherein you are able to When you require
withdraw a fixed regular income from
amount at regular your investments
intervals from a scheme
How does it work? What to keep in
mind?
Investor instructs AMC Withdrawal should be
to sell units on a specific made keeping
date and credit the expenses and goals in
fixed amount to mind. Withdraw more
investor's bank account to beat inflation
#SimplifyWithRitesh
SWP - WHEN SHOULD YOU USE IT?
Retirement Planning Investment Strategy
Useful to invest in a If you get a bonus or
debt MF along with one time payout, can
other things like FDs invest in liquid or
short term funds
Helps regular payouts
to supplement Use SWP to withdraw
regular income this amount over 9-
12 months
Advantages
Steady flow of income
Averages out the market - in a rising market
Partial redemption - no need to redeem all units
Tax efficient
#SimplifyWithRitesh
WHAT ELSE WILL BE
COVERED IN THE SERIES?
We have now covered the topics in Red -
keep following along the series
Topics and jargons that will be covered
Types of mutual funds
Basic Terminologies
AUM, NAV, NFO, Benchmark, PRI, TRI, Portfolio
Turnover Ratio, Expense Ratio, Market Cap,
Trailing and Rolling Returns
SIP, STP, SWP
Deeper dive into types of funds
Taxation of Mutual Funds
How to select mutual funds
#SimplifyWithRitesh
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