Mutual Fund industry is making huge efforts to popularize mutual funds SIP investment. Nowadays lot more people are investing in SIP investment. While others are still worried about how SIP works. If you are still constantly thinking is investment in SIP safe, this post is relevant to you.
We will explore SIP investment safety in both long & Short term tenure with real-life examples of equity & debt funds.
SIP investments offer a disciplined approach to investing, enabling you to invest a fixed amount regularly in mutual funds.
With SIPs, you can mitigate risks by spreading your investments over some time, averaging out the purchase costs. This leads to the potential for higher returns in the long run. One of the key advantages of SIP investments is their affordability.
want no risk with your investment, but want to pay monthly – refer to the post below
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With a lower starting amount compared to lump sum investments, SIPs make it easier for individuals to commence their investment journey.
Additionally, SIPs provide flexibility, allowing you to increase or decrease your investment amount depending on your financial goals.
By incorporating the power of compounding and rupee cost averaging, SIP investments can help you create wealth over time.
So if you’re seeking a safe and effective way to grow your financial portfolio, consider exploring SIP investments for a brighter future.
Table of Contents
What is SIP investment?
SIP investment is a systematic periodic investment in mutual funds. In simple words, it is a recurring ( daily/ weekly/ monthly/quarterly/half yearly /yearly ) investment for a fixed amount.
For Instance, Bestii Singh wants to start a SIP investment in a mutual fund. He starts a systematic investment plan ( SIP ) ICICI Prudential Bluechip Fund & invests Rs 3000 every month for 10 years.
Now this SIP amount is fixed here. He will pay initially and thereafter there will be an automatic deduction every period ( daily/ weekly/ monthly/quarterly/half yearly /yearly ).
Understanding the concept of systematic investment planning
Whatever we buy has a price tag, similarly, the mutual fund is bought in units. The mutual fund NAV ( price tag of one mf unit) is the purchasing price of one MF unit.
We invest regularly to purchase and accumulate Mutual fund units.
Benefits of SIP investment
There are numerous benefits of SIP investment. But the most important benefits are its high Liquidity ( except close-ended funds), ease of investing, Easy small investment amount to start with, wealth accumulation and more.
Read more about – SIP Pros & Cons – What YOU Must Know?
How SIP investment works
Let’s understand with an example of Bestii Singh is investing a fixed amount of Rs 3000 monthly. His investment date is fixed. The money is deducted every month. The NAV is the price of one MF unit. He accumulates units every month.
Thus via investing through SIP, he can accumulate and grow his wealth over time.
Read more about: Step Up SIP Can Make You Millionaire- Know How?
| ICICI Prudential BlueChip Growth | ||||
|---|---|---|---|---|
| Nav Date | Nav | Cumulative Units | Cumulative Invested Amount | Market Value |
| 24-07-2023 | 76.84 | 39.0422 | 3000.0 | 3000.002648 |
| 22-08-2023 | 77.06 | 77.9729 | 6000.0 | 6008.591674 |
| 22-09-2023 | 79.02 | 115.938 | 9000.0 | 9161.420759999999 |
| 23-10-2023 | 77.88 | 154.4588 | 12000.0 | 12029.251343999998 |
| 22-11-2023 | 81.12 | 191.441 | 15000.0 | 15529.693920000002 |
| 22-12-2023 | 87.12 | 225.8763 | 18000.0 | 19678.343256 |
| 23-01-2024 | 89.19 | 259.5124 | 21000.0 | 23145.910956 |
SIP vs lump sum investment: Which is better?
People are often confused about whether to invest in one shot or invest a big chunk at one time. To get details about all pros and cons about SIP vs lump sum investment-
Please read: SIP Or LumpSum – Which Is More Profitable?
Choosing the right SIP investment plan
Choosing the right SIP investment plan is crucial for financial success. Read How to choose the right SIP investment plan.
SIP investment strategies for different financial goals
People have a common Financial goal of wealth accumulation. But you know, every individual risk appetite is different.
Hmm! What and how different? you may ask?
Few people need money exactly in 4-5 years and will have to invest in low to moderate-risk mutual fund while those who are not dependent on this money/ not at all dependent / partially dependent on this investment will have different risk profiles.
Is investment in SIP safe?
Let’s evaluate Systematic Investment Plan ( SIP) safety in different time frames. SIP investment is not 100% safe. SIP return may vary from fund to fund, time frame to time frame.
There is no guarantee of returns or capital invested. But if we look at the historical data of any fund, SIP may have given low returns in the short term. But usually, you get a good return in the long run.
The return of a one-year investment. Similarly, long-term investment returns may vary.
| ICICI Pru BlueChip Gr | ||||
|---|---|---|---|---|
| Nav Date | Nav | Cumulative Units | Cumulative Invested Amount | Market Value |
| 01-01-2020 | 44.56 | 67.325 | 3,000 | 3,000 |
| 03-02-2020 | 42.97 | 137.141 | 6,000 | 5,893 |
| 02-03-2020 | 40.8 | 210.671 | 9,000 | 8,595 |
| 01-04-2020 | 30.57 | 308.806 | 12,000 | 9,440 |
| 04-05-2020 | 34.34 | 396.168 | 15,000 | 13,604 |
| 01-06-2020 | 36.65 | 478.023 | 18,000 | 17,520 |
| 01-07-2020 | 38.39 | 556.168 | 21,000 | 21,351 |
| 03-08-2020 | 39.9 | 631.356 | 24,000 | 25,191 |
| 01-09-2020 | 42.16 | 702.514 | 27,000 | 29,618 |
| 01-10-2020 | 41.36 | 775.048 | 30,000 | 32,056 |
| 02-11-2020 | 42.24 | 846.071 | 33,000 | 35,738 |
| 01-12-2020 | 47.38 | 909.388 | 36,000 | 43,087 |
| 01-01-2021 | 50.58 | 968.700 | 39,000 | 48,997 |
Do you want to see the SIP returns with yearly enhancements
SIP investment and tax benefits
What Are The Benefits Of SIP Account In Tax Saving?
ELSS Funds Meaning, Tax Benefit & How To Invest?
Mutual Fund Taxation – How Your Gains Are Taxed?
Top 3 Easy Ways To Cancel SIP In A Click
Conclusion: Is SIP investment right for you?
SIP investment can be the right choice for you. You can choose SIP as your goals and needs. SIP can also be used for wealth Creation. SIP can be used for multiple goals that may include short-term needs like asset purchase, retirement planning, wedding, education or other goals as well.
ICICI Prudential Freedom SIP- Worry Free Retirement Solution
