A systematic Investment Plan (SIP) is a methodology that allows investors to regularly invest in a scheme. In other words, you invest a specific amount in a scheme at fixed intervals like a month, fortnightly or weekly.
The SIP installment amount could be as small as Rs 500 or Rs 100 in specific cases. SIP in today’s time is gaining popularity among investors who are looking to shift to mutual funds from the conventional mode of investment. It is also considered to be a convenient method of investing in securities or the equity market as it is easy and offers flexibility.
In today’s edition of Money Guru, hosted by Zee Business’ Swati Raina, Firoz Aziz of Anand Rathi Wealth Management, will answer queries related to SIP and how effective it is in wealth creation.
He said that SIP eases the risk of the market while facilitating a disciplined investment habit, thus yielding great results. Asset management companies have experts with a wealth of experience in investing equity market. They manage funds on behalf of the investors.
“When you invest through SIP, you are allotted units. When the market is low, you are allotted more units. It allows you to reap the benefits of market volatility. This helps you to average the cost and you generate enormous wealth,” he said.
When asked whether choosing the date(s) in SIP affects investment and return, he said that mutual fund houses allow investors to select a SIP debit date as per their convenience. However, an analysis of six funds suggests that when the SIP debit date is around the fag end of a month, the return is greater than those going for 1st, 5th or any other SIP debit date.
Referring to the analysis, he said that if the investment horizon is 10 years, the selection of SIP debut date doesn’t affect the return much whereas, in 5 years, the return varies by 0.35% and 0.47% in the case of 3 years.
If you chose 25th as the SIP debit date and not 1, Firoz said, you will get a higher return. “25th is the most favourable day for SIP debit from your bank account.”