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A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds.

SIP allows you to invest a certain pre-determined amount at regular interval-weekly, monthly, quarterly etc.

SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.

A SIP is a flexible and easy investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme.

You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.

Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.

Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.

Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.

Long-Term Gains - Due to rupee-cost averaging and the power of compounding SIPs have the potential to deliver attractive returns over a long investment horizon.

Convenience - SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.

"Compound interest is the eighth wonder of the world. He who understands it, earns it...

he who doesn't... pays it.

- Albert Einstein

Example:

If you started investing Rs. 10000 a month on your 40th birthday, in 20 years time you would have put aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60.

However, if you started investing 10 years earlier, your Rs. 10000 each month would add up to Rs. 36 lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday - more than double the amount you would have received if you had started ten years later!

There are 21 equity funds which have completed 15 years.

If we talk about lumpsum investment, Rs. 1 lakh invested in these funds would have grown to Rs. 24.87 lakh in 15 years period translating into average return of 22.78% CAGR (Compounded Annual Growth).

Yes the average fund has multiplied your investment by 24 times in 15 years.

15 yrs Performance Returns on Rs. 1 Lakh invested

CategoryCAGRCurrent Value

Avg. of MF Schemes22.87%24,87,582Sensex11.72%5,30,932

During this period of 15 years, SENSEX has gone up from 3224 level to 19400 level, around 6 times.

If we talk about SIP investment, the average SIP return of 21 diversified equity funds is 21.18% over last 15 years. So someone who had started with SIP of Rs 10,000 in January 1998, has accumulated Rs. 1.12 crore as on 31st December 2012 (on an investment of Rs. 18 lakhs over the 15 year period)

15 yrs Performance Returns on Rs. 10,000 invested per month

CategoryCAGRCurrent Value

Avg. of MF Schemes21.18%1,11,92,342Sensex13.99%56,47,188

Just to give you a perspective, even the worst performing fund has delivered close to 9% tax free return in last 15 years (which is considered better than average bank F.D. return) and the best performing fund has 26.01% CAGR in 15 year period.

22.78%

25.00%

20.00%

14.40%

15.00%11.77%

8.82%

10.00%7.82%

5.71%

5.00%

0.00%

InflationGoldBankCo.SensexAvg.

DepositsDeposit

Equity MF

Actual Gain

25,87,582

30,00,000

25,00,000

20,00,000

15,00,000

10,00,000

7,52,682

5,30,932

2,29,899

3,09,3943,55,354

5,00,000

0

InflationGoldBankCo.SensexAvg.

DepositsDeposit

Equity MF

Lumpsum Returns (Returns generated on an investment of Rs. 1 lakh)

Scheme NameReturn CAGR (%)Value (Rs.)

Birla Sun Life Advantage Fund - Gr21.0717,60,144Birla Sun Life Rax Relief 96 Fund - Div27.4437,99,308DSP BlackRock Equity Fund - Reg. Plan - Div22.2220,27,348Franklin India Bluechip Fund - Div26.4133,64,128Franklin India Prima Fund - Gr27.1336,60,381Franklin India Prima Plus - Div26.8135,28,037HDFC Capital Builder Fund - Gr21.0117,50,765HDFC Equity Fund - Gr28.6643,92,575HDFC Tax saver - Gr30.4554,08,212HDFC Top 200 Fund - Gr23.1422,74,324JM Equity Fund - Gr8.943,61,136Morgan Stanley Growth Fund - Gr17.3310,99,067Principal Personal Tax Saver23.4623,59,798Reliance Growth Fund - Gr27.4938,18,883Reliance Vision Fund - Gr23.0222,36,008SBI Magnum Multiplier Plus 93 - Div17.7111,54,346SBI Magnum Tax Gain Fund - Div23.1822,81,006Sundaram Growth Fund - Gr19.0113,63,733Tata Ethical Fund - Gr20.5216,43,943Tata Tax Saving Fund - Div23.9925,16,517Templeton India Growth Fund - Gr19.4614,39,569

Average of All funds22.7824,87,582

SIP Returns (Returns generated on an monthly investment of Rs.10,000)

Scheme NameReturn CAGR (%)Value (Rs.)

Birla Sun Life Advantage Fund - Gr16.5470,48,896Birla Sun Life Rax Relief 96 Fund - Div21.111,05,39,858DSP BlackRock Equity Fund - Reg. Plan - Div22.121,15,26,279Franklin India Bluechip Fund - Div23.081,25,50,736Franklin India Prima Fund - Gr24.741,45,44,210Franklin India Prima Plus - Div23.161,26,40,161HDFC Capital Builder Fund - Gr20.631,00,64,134HDFC Equity Fund - Gr26.011,62,13,201HDFC Tax saver - Gr26.531,69,81,179HDFC Top 200 Fund - Gr23.721,32,27,232JM Equity Fund - Gr10.8443,11,789Morgan Stanley Growth Fund - Gr15.765,50,643Principal Personal Tax Saver18.9987,40,161Reliance Growth Fund - Gr27.811,91,05,968Reliance Vision Fund - Gr23.711,32,72,638SBI Magnum Multiplier Plus 93 - Div19.5591,82,510SBI Magnum Tax Gain Fund - Div22.061,14,65,139Sundaram Growth Fund - Gr17.9679,57,451Tata Ethical Fund - Gr20.1596,82,036Tata Tax Saving Fund - Div19.8193,95,644Templeton India Growth Fund - Gr20.561,00,39,314

Average of All funds21.181,11,92,342

Note : Total Investment Value is Rs. 18 lakhs