A Systematic Investment Plan or SIP has become a preferred mode of mutual fund investing by investors at large. The monthly average SIP book size of over Rs. 8000 crore and nearly 2.6 crore SIP accounts indicate its sustained attraction. What works best in an SIP is the facility it provides investors to invest a fixed amount as per their choice, systematically and in a continuous basis. An investor thereby enjoys the twin benefit of rupee-cost averaging and the power of compounding. The longer you stay invested, higher are the potential benefits. As it is said, it is time in the market and not timing the market that helps to create wealth over a long time.
While there are many people who now know the benefits of an SIP, not many know that SIPs also come with multiple facilities or variants that can augment your financial planning. While SIP is an effective way of instilling the habit of regular investing, but as an investment option it has evolved over the years much like the system upgrade of your smart phone. Here are some such facilities that investors can avail to make the most of their SIP.
Step Up/Top Up SIP
An investor can use a step-up or a top-up facility to increase their SIP amount in pre-defined frequency without any additional documentation. The benefit of this facility is that you can start with a small amount but as your investment appetite or earning increases you can gradually increase the amount to invest. This is a highly effective way of instilling the habit of long term investing. It is only logical that when returns are good on an investment it makes sense to leverage it. Higher the amount invested greater is the share of the potential return on an investment.
SIP with a Life Cover
Not many investors may be aware that a mutual fund SIP can also provide a life cover without any additional cost. The purpose is to provide with a mutual fund SIP an add-on benefit to protect one’s family with a life cover. At Aditya Birla Sun Life Mutual Fund, we offer SIP with the benefit of a life cover of up to Rs. 50 lakhs at no additional cost with the Century SIP (CSIP) facility. The life cover is available for the entire tenure of the investment or 60 years of age, whichever is earlier. CSIP expands the scope of a regular SIP and the facility is available across a comprehensive list of our equity and debt schemes.
The multi-SIP facility provisions accommodating multiple schemes in a single instrument. This is a great way to build a diversified portfolio in a hassle free manner. If someone invests in multiple schemes of a particular fund house, this option is worth exploring. For instance, the multi-SIP facility from our fund house enables the investors to subscribe under various schemes through SIP using a single form and payment instruction, thus reducing the paperwork involved.
Any Day SIP
The Any Day SIP facility gives investors the flexibility to choose an investment date (from the 1st till the 28th of the month) as per their convenience. Earlier the date for SIP investment was offered by the Mutual Fund House but now through the month uptill 28th one can select a date that works for them. So say you get your salary on the 7th of every month, and then you can choose a date post that. Or you receive a certain payout every month through a business and prefer to have your SIPs go out in the last week of the month.
The objective of Perpetual SIP is to create long term investing discipline without any hassle. How does it work? Usually any SIP mandate has a pre-determined tenure with a start and end date which could be anything between 1-10 years. After the SIP matures, investors may not renew wary of operational load, thus disrupting the investment discipline and the potential of higher returns had it been continued. This is where Perpetual SIP becomes useful. While signing up the SIP mandate, the investors have a choice to not enter the end date in the SIP mandate. This provides an option for the investors to redeem the fund after achieving the desired financial goal.
Micro SIPs are essentially SIPs in which the minimum application amount is as low as Rs. 100. This is a useful variant for first time investors especially, and as they spend time in the market they can gradually step-up the SIP amount to broaden their investible corpus. Aditya Birla Sun Life Mutual Fund offers this facility to investors of starting an SIP at just Rs. 100 in select schemes.
To sum up while all the above facilities add to the convenience and flexibility provided to investors, the golden rule for investing is to stay invested for a longer time horizon to let the benefit of compounding reflect.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.