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Systematic Investment Plans (SIPs): A Disciplined Approach to Mutual Fund Investing

In this chaotic world, having a systematic approach can be refreshing. This applies to your investments too. The good news is there are some ‘systematic’ ways to invest your money and gain benefits. In this article, Multipl will discuss Systematic Investment Plans (SIPs) and why it’s a great mutual fund investment option for building wealth over time steadily. 

What is SIP (Systematic Investment Plan)?

A SIP (or a Systematic Investment Plan) is an easy and smart way to invest in Mutual Funds. SIP allows you to invest a fixed amount on a monthly basis. It is a planned approach towards mutual fund investment that helps you develop a discipline of regular investing and build more wealth over the long term.

Planning to achieve your financial goals? The Multipl app helps you choose the right mutual fund schemes, diversify your portfolio, and monitor your investments regularly. Start your mutual fund investment via SIP with Multipl today!

How SIP works

The fundamental idea of a SIP is very simple. You invest in a mutual fund regularly regardless of market conditions. Using the SIP strategy, you buy more fund units when the market is low and vice versa. 

Here’s how your mutual fund units are allotted when you invest through SIP: 

No. of units = (The investment amount/NAV of the fund)

* NAV (Net Asset Value) is the per-unit cost of buying a mutual fund.

Imagine you invest ₹6,000 in a mutual fund every month. Let’s take two situations when the NAV of the fund is ₹20 and ₹15.    

Case #1: NAV of the fund is ₹20. No. of units = 6,000/20 = 300.

Case #2: NAV of the fund falls to ₹15. No. of units = 6,000/15 = 400 units. 

In either case, you have a win-win situation. When the market goes down, you buy more units, while when the market goes up, the value of your mutual fund investment rises. 

All your fund units will have the same value at the time of redemption. It’s just that you would have purchased some at a lower cost and others at a higher price. In the long term, your total cost gets averaged out. This is called rupee cost averaging.  

When you invest in SIP, you ensure a consistent investment without hurting your bank balance. It’s also important to invest for the long-term and across different market cycles to help maximise your returns. 

Benefits of Investing in SIP          

Anybody can invest

SIPs are easy to understand, and anyone can invest in them. SIP doesn’t require in-depth market research or analysis. You don’t even need to monitor market performance actively. Identify a fund that matches your goals and continue your mutual fund investments. This way, you can avoid market timing and other risky strategies. 

Based on your risk profile, goal amount, duration, and market valuations, Multipl recommends the Mutual Fund(s) best suited for your goal. 

Power of Compounding

The power of compounding is perhaps the most important benefit of investing through SIP. It ensures that your financial yields earn returns themselves. This way, you achieve a significant corpus through consistent investments. However, this works best if you invest in the long term. So, start investing in SIP early to maximise your mutual fund investment returns. 

Easy to invest and monitor

Every month, you don’t need too much time out of your daily routine to invest. With Multipl, you can automate your SIP and transfer a fixed amount to the fund each month after you’ve selected your goal, whether it be wealth creation or emergency fund. You can also track the fund’s performance using the Multipl app on your smartphone.    

Final Words

Systematic Investment Plans (SIPs) provide a disciplined and structured approach to mutual fund investing. However, to make the most of SIPs, it’s crucial to select the right mutual fund scheme that aligns with your objectives, risk tolerance, and time horizon.

Note – SIP does not guarantee a profit or protect against loss in a declining market.  

About Multipl 

Multipl is the world’s first “Save Now, Pay Later” app. With Multipl, you can create goal-based investments, which means you can save some money and invest at the same time for a specific purpose. 

The Multipl investment engine allocates the right assets and investment portfolio based on your duration, purpose, and risk profile so you can achieve your goal with maximum safety and liquidity. You can create both short term and long term savings goals like Gadget Goal, Vacation Goal, Child’s Education Goal, Retirement Savings Goal, Down Payment Savings Goal, and many more. In addition, brands co-invest with you to save more towards your goals. To learn more, download the app from Play Store/App Store.  

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