Systematic Investment Plan: Better option for monthly saving

Systematic Investment Plan or SIP is one of the two methods of investing in mutual funds. The investors who were earlier unwilling to make one-time investment due to the involvement of a large sum in spite the desire to invest now have the option of investing in regular installments of SIP. The reasons can be any like, low income, the philosophy behind investment and many more. Keeping in view the restrictions that the clients faced while investing a lump sum, mutual fund experts felt the urgency to devise such a plan which could attract more and more investors who otherwise kept a distance from investing. SIP is similar to recurring investment but far better than that in many ways.

How SIP is better than other saving options?

As we all know that saving is entirely different from investing. But, many people equate RD and SIP. It is an entirely a wrong practice. To understand the vast difference among the two options the following points must be read:

• There are no time restrictions in SIP. As, there is no minimum or maximum period defined for sip investment. One can invest for longer duration in equity-oriented schemes while liquid funds help to invest for relatively shorter time duration. Unlike, other investment methods which have some minimum and maximum stipulated time-period. 
• The client doesn’t need a bulk amount, for investment. The idea behind investing through SIP is to reduce the burden of one-time investment from the shoulders of the client. But, you require a lump sum to invest in other options available for investing, like FDs. 
• An investor is free to withdraw the invested sum (after lock-in period if any), as and when required. There is no entry or exit load (in some schemes there is 1% exit load). But, if you withdraw your money from FD/RD before the maturity period, you will have to pay a penalty for it which will be deducted from the amount which the client had invested initially. Therefore, incurring a loss in the principle amount.
• SIP can be paid automatically through the bank account of the investor, making use of the facility called auto-debit/ECS. The investors need not go again and again to withdraw and deposit cash. But, same is not applicable to FD. An investor has to go to the branch repeatedly, either to commence the investment or to withdraw it. Standing instructions can not be given for same. 
• Systematic Investment Plan brings about financial cohesion. It is possible because the investor knows he/she will have to spare a certain amount for the purpose of investment. This automatically brings the income and expenditure in proper shape. But, in other investment options like FD, you have to accumulate money. The idle money in your account, during the process of accumulation, will attract you to spend it.

With the growth of technology, using SIP has become even more comfortable. SIP was designed as a method of investing in the mutual funds which followed a regular installment method. Now, you can use the auto-debit option to get your installment for SIP debited from your saving bank account. Just give a standing instruction to your bank for debiting the amount and from thereon you need not have to remember the date of paying SIP. You can also select your scheme through the various investing options provided by the AMCs. Now, it has become more easy for the investors to plan and pay their SIP installments.

Get a better insight for organizing your investments

Have you ever seen a construction site? It is amazing to see how a sky-scraping building is constructed by placing the bricks in the right places. “Take care of small things and big things will automatically fall in place”, is a traditional saying which emphasizes on streamlining the tasks which appear to be small but produce a greater impact over the time. For example, for attaining a building, according to the plan, each brick has to placed accurately.

In the same way, investing is an activity that requires consistency and patience to attain desired gains. Mutual funds have been serving as one of the most secured ways of investing in stock market, bonds, securities, tax savers, etc. The clients can fulfill their needs with the help of investing in any of these instruments. Along with providing varied avenues of investing, mutual fund provides two methods through which the clients can place their money in any of the selected scheme viz, Lump Sum and SIP (Systematic Investment Plan).

What is SIP?

It is a method of depositing small amounts on a regular basis in any of the schemes selected by the clients. SIP was initially introduced to make the investment process easier as numerous clients are willing to sacrifice a huge sum at a time. This mechanism not only waves off the burden from the client’s shoulders but also makes it easier for him/her to invest more frequently. By investing as low as Rs. 500 through SIP plans clients can enjoy to accumulate a huge corpus over a prolonged period.
Top five SIP plans for 2016

There are a lot of mutual fund companies that provide innumerable schemes to the clients for investment. According to client’s risk-appetite and investment needs the clients can choose any of the schemes to invest their hard-earned money. The mutual fund experts mark some funds as the top SIP plans on the basis of the report of past 5-year performance, NAV index, Portfolio assessment, and Profit/Loss analysis report. There are following plans which have been rated to be the top five plans of 2016 in India:

1. DSP BlackRock Micro Cap Fund: It is an equity-oriented scheme which invests in small-cap and mid-cap companies. This scheme intends to apprehend the profits based on long-term growth potential of the newly established companies. Every small-cap and mid-cap company is in the initial years of business and consists the capability to make progress. DSP BlackRock Micro Cap Fund was initially launched in the year 2007 and has been able to mark its presence in one of the five top performing SIP funds. The AUM of the fund is Rs. 2,004.13 Cr which shows the popularity of the fund. The various options available under this top performing mutual fund in India are Growth, Dividend, Payout, Reinvest. There is an exit load of 1% for the investors who withdraw their money before the period of 12 months. 
2. Tata Balanced Fund: A balanced fund is one of the funds lying under the hybrid category whose major investments are in equity and relatively less portion is being invested in money market instruments. Equity investments provide the much-required growth of funds through capital appreciation while on the other hand, money market instruments facilitate fixed income benefits. Tata Balanced Fund is one the top performing funds under the hybrid funds category. The scheme is an open-ended fund and has 65:35 ratio of equity and debt respectively.         
3. ICICI Prudent Value Discovery Fund: This scheme is an open-ended diversified equity fund. Money invested through this fund is wisely diversified across various sectors of out economy like pharmaceuticals, banking, IT, etc. The fund manager contains a list of all those companies that are fundamentally strong and have ethical approach along with offering affordable stock prices. Hence, extending the benefits of capital appreciation over a long period.
4. Axis Long Term Equity Fund: It is also categorized under ELSS category. It has a three year lock in period and was started in the year 2009. There is no entry and exit load and it is an open-ended scheme. The scheme invests in sectors like banking, finance, consumer durable, etc. In a short span of seven years Axis Long Term Equity Fund has been able to make an impression among the investors and attain a position among the five most preferred SIP funds. 
5. L&T India Value Fund: The scheme aims at generating long-term capital appreciation by providing a diversified portfolio of equity and equity-related securities. The Scheme also invests in Foreign Securities in international markets along with the advantage of providing growth and dividend options.

Therefore, the clients should adopt SIP as their mode of investment which will undoubtedly help in accumulating wealth penny by penny over a long period of time.