POWER OF
SYSTEMATIC INVESTMENT PLAN
(SIP)
LET THE SIP WORK HARD FOR YOU
To know more,
contact your
Financial Advisor today
(c) 2015, Centre for Investment Education and Learning Pvt Ltd
www.ciel.co.in
The material in this booklet has been created and designed by:
Author: Girija Gadre
Design: Chriselle Antao
PREFACE
The Mutual Fund Industry has fast grown to become
an important component of the Indian economy,
helping channelize household savings into the
capital market. Moreover, mutual fund investment
has become an important way for citizens’ private
investment and wealth management. In light of this,
investor education is an important aspect to keep
the investor well informed, as well as protect their
legitimate rights and interests, particularly for small
and medium investors.
This booklet is a specific exhibition of Reliance Mutual Fund’s efforts to
spread awareness and continue building the investors’ knowledge. It
explains investment related information in simple language and in a lively
and vivid manner. I am sure, investors of all kinds will find value in this
booklet and be encouraged to use this is a stepping stone towards practicing financial prudence.
All the very best and happy reading.
Sundeep Sikka
Executive Director & CEO
Reliance Nippon Life Asset Management Limited
(formerly Reliance Capital Asset Management Limited)
SHOULD YOU WORRY ABOUT THE WINTER?
In a field, one summer’s day, a grasshopper was hopping and
chirping about merrily, while the ant was toiling away trying to
accumulate a stock of food for the harsh winter.
The grasshopper wasn’t worried as he wasn’t thinking about the
winter. There was plenty during the summer! He mocked the ant for
working so hard to safeguard the future.
I am young and earning well.
I must enjoy and splurge.
Why should I save and invest?
1
FROM PLENTY TO SCARCE
Why bother about the winter now, if there’s plenty during the summer?
Winters are harsh when food becomes scarce.
In winter, the grasshopper had to beg for food as it found itself dying
of hunger. The ant, on the other hand, had stored enough and could
consume it gradually without any difficulty whatsoever.
2
Some day I will retire and will have no
income. How will I manage emergencies,
child’s education, new house?
ACCUMULATE WHEN THINGS ARE APLENTY
The ant took advantage of the season of plenty and stocked up food.
She was not lazy when the going was good. She took that opportunity
to collect as much as she could. She knew it was a good idea to
accumulate when food is available in plenty.
Oh I see! I must invest now to
reap benefits later. But how?
3
MAKE INVESTING A HABIT
Ant was disciplined and believed in working hard, unperturbed.
She knew her goal was to get to a huge stock that would last
her the winter.
If the grasshopper also would have been able to inculcate such
discipline and planning, he would have not starved later.
I must start investing regularly and
systematically irrespective of the
market movements
4
BENEFITS OF LONG TERM INVESTING
Ant’s huge stock of food was not built in a day! It was a gradual process.
She toiled and toiled endlessly over the whole of summer.
The longer the horizon, the higher the benefit.
Grasshopper, on the other hand, ran up and down towards the
end of summer trying to gather some grain, but he ran out of time
and could only accumulate little. By the time he realised that he
should have started early, it was too late!
The small amounts I invest regularly
using SIP can grow into substantial
wealth over the long term.
5
TIMING THE INVESTMENT IS USELESS
The grasshopper thought that he would work smart (and not hard!) by
collecting on days when there was a lot of grain easily available.
But he was never able to accurately predict such timings of easy pickings!
The ant, however, picked whatever was available. She picked higher
quantities on days when they were available and lower on some others.
I must ideally ‘buy low and
sell high’! But I am unable
to catch the top and the
bottom of the market.
6
BENEFITS OF RUPEE COST AVERAGING
There were times when the ant was able to accumulate
loads, while only smaller portions on the others. But in the
end, it all stocked up well for her. The smaller
portions on certain days were averaged out by the huge
portions she managed on the other days. It didn’t matter
how much she was able to collect on individual days. What
counts is that she was able to accumulate a sizeable
quantity over the long term.
AVG
With SIP, I buy different number of units
with the same amount of money and my
average cost is lower. Hurrah!
7
HOW THE MAGIC WORKS?
Let us equate the hard-working ant to a disciplined mutual fund
SIP investor. He invests Rs.100 every month over a 8-month
volatile period. As he invests at various NAVs, he is able
to ‘buy more when the markets fall’ and vice versa. As a result,
his average cost is much lower than the average NAV
This is ideal - takes the guesswork out of investing!
25
High NAV;
Less units
20
Low NAV;
More units
15
10
5
0
1
2
Units allo ed
3
4
Average cost
5
6
NAV movement
7
8
Average NAV
SIP would automatically
allow me to earn more units
when the markets fall and
lesser when the markets rise.
This is ideal investing!
8
IT IS IMPORTANT TO KEEP AT IT!
The grasshopper finally saw merit in what the ant preached and
started to accumulate regularly. But suddenly there was dearth
of grain all around. Everyone panicked and gave up!
He too saw no merit in continuing and stopped.
But the ant knew that the scenario would look down sometimes
and up at other times. So she doubled the effort and kept
collecting whatever she could manage. So when the drought
was over, to the grasshopper’s amazement, she had
accumulated a fairly large quantity.
Drought !
I give up!
Things will better..
I’d rather work harder.
Falling markets is not the time to stop
accumulating. I must not panic and
discontinue my SIP!
9
HOW MUCH SHOULD YOU SAVE?
The ant was a tiny creature but carried grain measuring
a multiple of its weight. She had set for herself a goal in
terms of the quantity that she wanted to accumulate and
she worked towards that.
Unlike the grasshopper, she stepped out of her comfort zone
and kept at it even when the going was tough. In the end, she
alone was sitting on a huge stock of grain, while the
grasshopper ran helter skelter looking for food.
I should not limit my savings to
‘whatever I can manage’.
I must set myself a target saving
ratio in order to achieve my
goals and stick to it.
10
START AN SIP NOW
SIP is a powerful tool of wealth creation over the long term. Even a
small creature like an ant was able to put together its stock of food
by collecting and working bit by bit. This was of course possible
owing to its discipline and hard work.
Push yourself now, or else you’ll run short later. So plan for the
future. Start an SIP now and dance your way into your winter!
Thank God for the SIP!
If it weren't there, I wouldn’t
be investing.
11
PLAN FOR THE WINTER
OF LIFE USING SIP
12
(c) 2015, Centre for Investment Education and Learning Pvt Ltd
www.ciel.co.in
Author: Uma Shashikant
Material in this booklet is intended for educational purposes and seeks to explain concepts that
enable a better understanding of Systematic Investment Plan (SIP). CIEL does not sell, or promote
any financial product or earn any advisory fee or distribution commissions and does not accept any
liability for use of information contained in this booklet.
The information provided in this booklet us solely for creating awareness about SIP and for the
general understanding. The Views expressed herein constitute only the opinions & do not constitute
any guidelines or recommendation on any course of action to be followed by the reader. Many of the
statements and assertions contained in this booklet reflects the belief of RNLAM, which belief may
be based in whole or in part on such data and other information. This information is not intended to
be an offer or solicitation for the purchase or sale of any financial product or instrument. This
information is not intended to be an offer or solicitation for the purchase or sale of any financial
product or instrument.
Readers of this booklet are advised to seek independent professional advice, verify the contents
and arrive at an informed investment decision. Neither, the sponsor, the investment manager,
Mutual Fund, the Trustee, their respective directors, nor any person connected with it accepts any
liability arising from the use of this information.
13
CALCULATE YOUR SIP
5 lacs
Yrs/%
4%
8%
12%
15%
5
7,542
6,805
6,122
5,645
10
3,396
2,733
2,174
1,817
20
1,363
849
505
334
30
720
335
143
72
10 lacs
Yrs/%
4%
8%
12%
15%
5
15,084
13,610
12,244
11,290
10
6,791
5,466
4,347
3,634
20
2,726
1,698
1,011
668
30
1,441
671
286
144
20 lacs
Yrs/%
4%
8%
12%
15%
5
30,168
27,219
24,488
22,580
10
13,584
10,932
8,694
7,267
20
5,453
3,395
2,022
1,336
30
2,882
1,342
572
289
50 lacs
Yrs/%
4%
8%
12%
15%
5
75,416
68,049
61,222
56,450
10
33,956
27,330
21,735
18,167
20
13,632
8,489
5,054
3,339
30
7,204
3,355
1,431
722
1 cr
Yrs/%
4%
8%
12%
15%
5
1,50,832
1,36,097
1,22,444
1,12,899
10
67,912
54,661
43,471
36,335
20
27,265
16,977
10,109
6,679
30
14,408
6,710
2,861
1,444
RELIANCE MUTUAL FUND
INVESTOR EDUCATION BOOKLET SERIES
POWER OF
SYSTEMATIC INVESTMENT PLAN
(SIP)
EQUITY LINKED SAVINGS SCHEME
LET THE SIP WORK HARD FOR YOU
Tax Saving and Much more
EQUITY
MUTUAL FUNDS
SIMPLIFIED
HOW?
WHY?
WHEN?
Financial Planning
“An investor without an investment objective is
like a traveler without a destination.”
- Ralph Seger
I am a Smart Investor
How to meet your
financial goals with
Debt Mutual Funds
PLANNING FOR
YOUR RETIREMENT
How equity can help
you meet your
financial goals?
DO’S AND DON’TS OF INVESTING
DEBT
MUTUAL FUNDS
SIMPLIFIED
SMS ‘EDU’ to ‘561617’
Visit www.reliancemutual.com/Investor-Education
SMS charges apply.
Disclaimer:
The information provided in this booklet is solely for creating awareness about Systematic Investment Plan (SIP) and for general understanding.
The views expressed herein constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be
followed by the reader. Many of the statements and assertions contained in this booklet reflects the belief of Reliance Nippon Life Asset
Management Limited (formerly Reliance Capital Asset Management Limited), which belief may be based in whole or in part on data and other
information. Reliance Nippon Life Asset Management Limited does not guarantee the completeness, efficacy, accuracy or timelines of such
information. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Readers
of this booklet are advised to seek independent professional advice, verify the contents and arrive at an informed investment decision. Neither,
the sponsor, the Investment Manager, Mutual Fund, the Trustee, their respective directors, nor any person connected with it accepts any liability
Arising from the use of this information.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.