What is Systematic Investment Plan?
Many open-ended mutual funds offer a Systematic Investment Plan to encourage regular investments. This program allows unit holders to save a fixed amount of rupees every month / quarter by purchasing additional units of the Scheme(s). Under this plan, unit holders can benefit by investing specified rupee amounts periodically. This concept is called Rupee Cost Averaging. Example Let us take an example of a unit holder who invests Rs. 100 per month in a scheme that had a unit price of Rs. 10 initially. Over the next few months, the market falls (causing the unit price to drop) before recovering to its original value. At the end of 5 months the Unit holder would have 65 units each worth Rs. 10. He would therefore have Rs. 650 worth of units after investing Rs. 500 and therefore have a profit of Rs. 150.
For as little as Rs. 250* each month for 12 months or Rs. 500 every month for 6 months, you can purchase mutual fund units and avoid larger minimum investment amounts of over Rs. 1,000. Fixed amounts can be invested in Mutual Funds each month using funds drawn automatically from your savings account regularly. Investing in SBIMF’s Systematic Investment Plan (SIP) offer the benefit of “Rupee-cost averaging”, i.e., by purchasing Mutual Fund units over a period of time, you automatically buy more units when prices are low and fewer units when prices are high, resulting in lower “per unit acquiring cost” as a result of averaging. [*: For Magnum Gilt Fund, you can avail of SIP with Rs. 10,000 per month for 12 months.
