Deciphering Systematic Investment Plans for

Dummies

It is an exciting moment in every individual’s life, when he

goes from becoming a student to a working professional. The feeling of

attending interviews, getting the right job, being introduced to your

colleagues, finding new friends at your work place, making mistakes, learning

from your mistakes and of course getting that first pay cheque – it is

exhilarating.

But, at the cost of sounding clichéd, with great power comes great

responsibilities; and having your own, hard-earned money is a great power

indeed!

Every earning individual would have been advised by parents, relatives and

friends about the need to save his/her money. While it is extremely exciting to

earn your money and be answerable to no one, it is equally important to invest

that money in the right place, so you can take maximum advantage of it. It is

gratifying to make impulse purchases with your money, but that gratification

won’t last long if a small part of your salary is not being rightly saved.

Most Indians take investment planning and savings very seriously. Our country

has a healthy savings rate of 35%, something we can definitely be proud of.

However, figures also suggest that most Indians find the stock market to be an

alien, intimidating entity that they cannot wrap their heads around. Just 2% of

the country’s population invests in equities.

So, how do you decipher the ‘cryptic’ world of stock markets?

Well, it is simple; you don’t have to - at least not just yet.

Welcome to the world of Systematic Investment Plans – a beginners’ stepping

stone into the stock market.

Mutual Fund SIP enables you to invest a fixed sum, at regular intervals, so you

can capitalize on the ups and downs of the market – without the anxiety of

investing at the ‘right time’.

When you sign up for an SIP Mutual Fund, it automatically debits a pre-

decided sum from your account and invests in one of more mutual funds of

your choice. You can choose your investment period to be weekly, monthly,

quarterly etc. But monthly is a good option for a young professional who is

getting his/her salary every month.

Mutual Funds SIP give you the flexibility of personally deciding the best mutual

funds to invest in – either by doing a simple research on the internet or by

consulting the Relationship Manager in your bank.

One of the biggest advantages of investing in SIP Mutual Funds is that it

insulates you from the shocks of the stock market. Since you have committed

to regularly invest in the market, you end up buying more units if the market

goes down, thereby increasing your investment through Rupee Cost Averaging

Systematic Investment Plans is one of the best investment options for a young

professional for multiple reasons. The power of compounding makes early

investments far more beneficial than delayed ones. By investing early, you are

enabling your money to earn more money over a significant period of time.

This can get you hooked onto a cycle of disciplined investing. Even if the

amount you are investing is as low as Rs 100, you can build a corpus.