Systematic Investment Plan - SIP

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.

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.

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.

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.

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.