When we take a small sip of a cup of coffee, it quickly leads to the next and before we know it, the entire cup has been emptied and a feeling of contentment takes over. Today, we recommend that you take a tiny SIP of the mutual fund market and start building your future corpus. And that contentment we spoke of? Will come over time!

SIP or a Systematic Investment Plan is the easiest way to put in small amounts of money into mutual funds and get the maximum benefit out of them in the long run. In our busy lives, while we have the right intentions, we often put savings on the back burner, choosing to spend instead on goods and social entertainment. This is where an SIP can come in and quietly work in the background to help with the discipline to save regularly.

Systematic Investment Plan (SIP) is the ideal way of investing in Equity Mutual Funds. It helps you:

  • Avoid the risk of timing the markets
  • It facilitates wealth creation in a disciplined manner
  • It averages the cost of investments, so you don’t have the hassle of monitoring the markets
  • As result of compounding, over time, small savings help create a big corpus.
  • Helps achieve your investment goals

 

Why choose SIP?

  • The Bull and Bear markets can be overwhelming. SIPs are a good way of testing your appetite for the stock market without daily monitoring.
  • Though SIP works silently, you always have the option of re-balancing your portfolio according to market valuation and your risk profile to achieve the right balance for you between Equity and Debt funds.
  • You have immediate access to your funds. If invested in open-ended mutual funds, an investor can terminate the investment at any point in case of a financial emergency. However, keep in mind that investments bear fruits if done for long-term. 
  • An SIP can help you work towards your long-run financial goals through regular systematic savings. These goals can be your retirement, children’s education, a dream home or even a dream vacation.

 

Here are a few tips to help you along your journey on the SIP route:

  • Mutual Fund managers do hours of expert research to identify stocks with potential to perform well over the years. While the stock selections are taken care by Fund Managers, we are happy to help you in selecting the right mutual funds for you depending on your risk profile.
  • Be realistic. Assess your income and expenses and keep a buffer before committing to the SIP route. While you can always stop at any time, it is best for you to decide on a workable amount of spare cash at regular intervals to maintain the discipline of investment.
  • It is always advisable to assign goal to your SIP investments. It helps you to identify the investment for that specific objective and achieving the goal easily with time.
  • Check fund details. We can help you with offer documents and related information before you make your final selection.
  • Start early and understand the power of compounding. Let’s look at this example: Rs.5000 invested monthly at a 10% p.a. return over a 30 and 35 year period would accumulate to Rs.1.13 crores and Rs.1.90 crores, respectively - a massive difference of Rs.77 lakhs! By simply starting to save 5 years earlier, a person benefits immensely!

 

Review the performance of your portfolio only after a certain interval as it takes time to judge the performance of a SIP. SIP needs to go through a few market cycles to be tested properly. And don’t worry, you always have the choice of realigning your fund composition. Long term is the key!

Start an SIP today.

 

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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