How Fruitful are Mutual Fund Systematic Investment Plans?

The best savings scheme in modern times is the mutual fund systemic investment plan. This type of investment is great for new investors or existing retail investors.

Systematic Investment Plans (SIPs) will help people ensure that a substantial portion of their savings is invested each month. This will eventually benefit them in reaching long-term financial goals. How does SIP work? Let’s see.

What does SIP do in today’s world?

One asset class that outperforms other long-term assets is equity. In volatile markets like India, equity is more likely to be categorized as an asset class. Investors will be able to take control of volatility by investing in SIPs in equity mutual fund.

SIP requires that people set a monthly amount which will be deducted from their bank accounts. This amount can be used to purchase mutual fund units, as determined by the bank ECS process. It is completely automated and saves time for users.

SIP is often recommended by financial advisors to their clients. The most popular question is, “Is SIP the best investment strategy with high returns in India?” It is better than investing a large sum. Let’s see.

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Is SIP more efficient than lump sum investments?

Imagine a person having invested Rs10 lacs in a capital fund that is performing well. Today, the investment’s value will be close to 38.5 lacs. If someone invests Rs. For example, if someone invests Rs. 8330 per month in the same fund that has been performing well over the past decade, their cumulative investment will be close to Rs. 10 Lacs.

This investment’s present value will exceed 20 lacs. When comparing these investments and the return they have given, it becomes clear that SIP is clearly the more expensive. The main point is that there will be no comparisons, or at least it won’t be possible.

The entire investment was made for a period of 10 years in the case of the large sum. SIP was a method of investing the money in equal monthly installments for ten years. Although lump sums are more lucrative than SIPs, it is true that they yield higher returns. What happens when annualized returns are considered? Which is the best safe investment with high returns in India?

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Over the last 10 years, the annualized returns for larger investment schemes are 14.4%. In case of SIPs it is 13.5%. SIP is also beaten by big investments. SIP is not comparable with any other large investment plans on the market and cannot be regarded as the best plan for high returns in India.

Is there a better way to invest than the monthly SIPs.

The questions here are whether SIPs can be considered safe investments that provide high returns in India, and if they are better than systematic investment techniques. Let’s compare two investment strategies to answer this question: a fixed monthly SIP amount or a systematic one. The amount invested in both cases will be the same, for example, Rs 5000.

Let’s say that the investment period was between 2008 and 2016. This timeline may show that the equity market has had some poor years. This will make it easier to create the result chart.

This chart shows that an investment of Rs. 5000 per month can result in Rs 9.2 Lacs, and a cumulative investment of close to 4.8 Lacs. The annualized return is therefore 15.7%. However, 16.5% will be the annualized return for systematic investment plans.

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Taking into consideration the bad years, the SIP returns have been excellent. It can be concluded that although there are many investment options available in today’s market, SIPs stand out and yield excellent results.