Sapna in Progress

• Investors can aim for achieving their financial dreams by goal-based investment in mutual fund schemes through SIP in a disciplined and systematic way from their regular savings.
• Investors may create wealth over long investment horizons through the power of compounding.
• Investors need not time the market and can take advantage of volatility through Rupee Cost Averaging

*Assuming return on investment of 10%. Note: Numbers are purely illustrative for investor education purposes. Please consult with your financial advisor to plan for your goals.

You can use a Sapnaplanner to calculate the above and plan your investments.

Systematic Investment Plan is facility through which an investor can invest a fixed amount in a mutual fund scheme of his / her choice at a fixed frequency which can be weekly, fortnightly, monthly or quarterly. The bank ECS mandate/auto debit instruction ensures that the amount gets debited automatically on the chosen date and frequency from the investor’s bank account and invested in the chosen mutual fund scheme. The number of units so purchased depends on the Net Asset Value (NAV) of the scheme on the investment date. The systematic investment tenure can either be fixed or perpetual, Investor can choose the option ‘Until cancelled’. However, the investor can cancel the SIP anytime by writing to the AMC branch office or an RTA office. AMCs normally take around 15 days’ time from the date of request made by the investor to discontinue the investments.

In Systematic Investment Plan, there is lesser risk of timing because investors buy units at different price points (both, at low and high NAVs). Investor buy more units when the market is low and buy less when the market is high. This is known as rupee cost averaging of purchase price and is especially effective in investment in equities as equity as an asset class is volatile. Rupee cost averaging usually lowers the cost of acquisition during bear markets and seeks to give better returns in the long term.

Under Systematic Investment Plan you can benefit from the power of compounding, which is nothing but interest earned on interest or profits earned on profits. The biggest advantage of mutual fund systematic investment plans is that, you may to create wealth with relatively small regular investments over a long investment tenure through the power of compounding. The below table shows a scenario analysis of the corpus built over different investment tenures and amount (assumption - 12% Extended Internal Rate of Return (XIRR)

As per SEBI regulations, if you want to invest in the schemes of Mutual Fund through Systematic Investment Plans, you need to be KYC compliant. You can now complete KYC requirements online through any AMC website which are offering this facility. You can fulfil KYC requirements by submitting filled in KYC form with your self-attested photograph affixed on the KYC form, to the AMC or the concerned RTA (different AMCs have different RTAs). The KYC form can also be downloaded from the AMC website. Along with the duly filled-in KYC form, you also need to submit self- attested copies of your identity and address proof (For example - it can be Aadhar Card or Passport or Driving License etc.) along with PAN card copy

If you are submitting the KYC documents directly to the AMC or RTA, in person verification (IPV) will be required. For IPV, you will have to carry original documents of ID, address proof and PAN card. AMFI registered mutual fund distributors are also authorized to conduct IPV. Through a mutual fund distributor, the IPV can be conducted at your place. You can also do a Video KYC by visiting the AMC website which are offering this facility – This is a completely paperless process and helpful if you want to do SIP investment online.

If you are an existing mutual fund investor, you are likely to have fulfilled all KYC requirements already. Hence, you need not follow the process mentioned above and can start SIP investment online or through a mutual fund distributor immediately.

Bank account is a mandatory requirement for starting systematic investments. You have to provide your bank account details in the application form as well as in the auto debit mandate form commonly known as SIP registration form. A cancelled cheque of the mentioned bank account with your name printed on it is required as a supporting document.

In the application form you need to mention the scheme name in which you want to start the investment. Along with the scheme name you also have to mention the scheme option – growth or IDCW and whether you want to invest in regular plan (through a mutual fund distributor) or in direct plan (directly with the AMC). If you are investing in a regular plan, the AMFI Registration Number (ARN) and EUIN number (Employee Unique Identification number) of the distributor has to be provided. If you are investing in regular plans, the distributor is expected to help you with filling out the application form and submission to the AMC

Any date SIP – This method allows you to select a scheme, its frequency and the amount. You have to mention the start date and end date of investment on the application form. Based on your mandate, the AMC will deduct the amount on the specific date and allot units to you. The systematic investment will continue till the end date chosen by you. You can continue your SIP account even after the investments have stopped and redeem whenever you want.

Perpetual SIP – Perpetual SIP is similar to Any Date SIP, the only difference is that there is no end date. While filling up the Systematic Investment Plan form, if you choose end period as ‘perpetual’, it will continue until you request the AMC to stop it. Once it is stopped by you, the AMC will stop deducting the instalment amount from your bank account. Post the SIP is cancelled, the NAV may continue to grow and you can redeem them whenever you want.

Top up SIP – Top up SIP allows you to increase the instalment amount at certain intervals, say – annually. You can top-up the instalment amount by a certain percentage in the chosen frequency. For example – your investment SIP frequency is monthly, amount is Rs 5,000, top up percentage is 10% and you want to increase it annually. In the first year, the AMC will deduct Rs 5,000 per month, in the second year Rs 5,500 per month and in the third year Rs 6,050 and so on.

This facility helps you invest more and create larger corpus in the long run.