Discipline/Habit

We all know that discipline becomes a part of our life only when we make it a habit. Just like breaking a habit is a difficult thing, starting a new one is also not very easy. It is human nature to procrastinate. That is why, an SIP (Systematic Investment Plan) is a tool that helps you in your savings and investment goals without making major active change in your financial habits.

People often tend to worry about how any error of judgement will impact their long-term future. This is where expert financial advisers come in. They are trained to understand and help clients identify the following:

  • Their investment goals
  • Their risk appetite

Once they have identified these, they can suggest investments best suited to your personal needs rather than following a herd mentality and suggesting a fixed set of investment options to all clients.
 

How can an SIP help?

  • It helps you to inculcate financial discipline of your money.
  • It helps you to put the investment plans on your priority list.
  • Early & regular investments can help you to compound the wealth.
  • It helps you to average out the capital invested and thereby reduces the risk.
  • As the investment happens in different cycles of the market, it is not required to time the market


Idle money gravitates to unnecessary expenditure. Instead, choose an SIP. An SIP is like a brick for a strong financial foundation. Before you know it, a corpus will be built quietly. Since an SIP investment is automatic, small amounts keep getting added to it every month without you even realising to create significant wealth over the long term without compromising your present expenses. When the interest you earn on your investment also begins to earn interest, think how quickly your money will grow!

SIP insulates investments from the human tendency of always trying to maximize profit. While there is no harm in buying low and selling high, it is almost impossible to time the market on regular basis. One slip in timing, the market can cost you significantly. SIPs take away this unnecessary interference and allow the rupee cost averaging benefit to help protect your investments and give you the best outcome.

It helps to follow Warren Buffett’s suggestion of ‘Do not save what is left after spending. Spend what is left after saving.’ First, we must learn to allocate a part, however small, of our income towards our savings. Then we can spend the rest. The important thing is to put savings ahead of unnecessary spends. This discipline is what will help our future become financially secure.

SIP helps to bring discipline in Financial Goal Achievement. One can define his/her financial goal after a certain time. There can be multiple goals after different time horizons. Ascertain the amount of SIP required to achieve those goals on respective times of requirement and then just continue the SIPs .

Most of us believe that only a lump sum investment can bring big returns. The flip side of buying low at lumpsum is you need to sell high (book profits) and re-enter at lower market levels. If you don’t sell high, you cannot maximize your returns when you do lump sum style of investing. This is the reason why SIP is preferable even for seasoned investors.

When you choose an SIP, as the name suggests, individuals can deposit small amounts in mutual fund schemes at regular intervals. The main advantage of SIPs is averaging. As you know, markets move up and down and as a result, your regular investments in these funds take advantage of the fall and rise in markets (reflected in the NAV of mutual funds).

When it comes to investing, the main objective is to generate returns. An SIP is the most disciplined, continuous and easy-on-the-pocket option to make regular savings for a more financially-secure future.

 

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

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Frequently Asked Questions

What is a Mutual Fund?

Mutual fund (MF) is a mechanism for pooling money by issuing units to the investors and investing funds in securities in accordance with objectives disclosed in the offer document.

Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is diversified because all stocks may not move in the same direction in the same proportion at the same time. Mutual funds issue units to the investors in accordance with the quantum of money invested by them. Investors of mutual funds are known as unitholders.

Investors in proportion to their investments share the profits or losses. Mutual funds normally come out with a number of schemes, which are launched from time to time with different investment objectives. A mutual fund is required to be registered with the Securities and Exchange Board of India (SEBI) before it can collect funds from the public.

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How can I purchase or redeem MF?

Purchase - Login to your Net banking account, select the investment tab and proceed with the purchase option. Select category of scheme eg. Equity or Debt.

For mobile banking investors, you need to login to your mobile banking app, select investment option and then purchase the mutual fund.You can also visit the nearest branch if you need assistance in investing in Mutual funds.

 

Redeem - Login to your Net banking account, select investment tab, and proceed with the redemption option for the required fund transaction.

For mobile banking investors, you need to login to your mobile banking app, select investment option, then select redemption option.

You can also visit the nearest branch if you need assistance to redeem your funds.

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What is a Systematic Investment Plan (SIP)?

An SIP allows an investor to invest regularly. One puts in a small amount every month that is invested in a mutual fund. An SIP allows one to take part in the stock market without trying to second-guess its movements

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What is an Investment Horizon?

An Investment Horizon refers to the length of time that an investor is willing to hold the portfolio for. Investment horizon can be classified as following 

  • Short term: These are investments with a short horizon of 3 months to 2 years. You plan to use the money for a particular thing soon, for example, creating a reserve fund for unexpected spending.
  • Medium term: Investment with a medium-term horizon of 2-5 years. You know that you will need the money in a few years. It is also possible to choose products that correspond to this horizon
  • Long term: Investments with longer-term horizons – 5 years or more. On retirement, for children to study and other longer-term goals.  

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What is KYC and how to get KYC verified for mutual funds investment?

Know Your Client (KYC) registration is mandatory for all investor as per SEBI guidelines. KYC is being centralized through KYC Registration Agencies (KRAs) registered with SEBI. With this, each investor has to undergo the KYC process only once in the securities market and the details would be shared with other intermediaries by the KRAs.

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