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Systematic Investment Plans (SIPs) have been a popular method of investing into the equity markets for years and promoted across the industry. The May 2022 data on SIPs show that we have around 5.48 Crores accounts (which is an indicator of the number of retail investors) and around Rs. 12,000 Crs collected vide the SIP route in May. These figures are significant and hence I am also giving you the table below which shows the year-on-year increase in the SIP contribution which has clearly shown a growth trend.

Period   SIP Contribution  (Rs)crore
  FY 2022-23 FY 2021-22 FY 2020-21 FY 2019-20 FY 2018-19 FY 2017-18 FY 2016-17
Total during FY 24,149 (Q1) 1,24,566 96,080 1,00,084 92,693 67,190 43,921

(Source: www.amfi.com)



What does growing number of SIP accounts and contributions mean?

1. A steady increase in the number of investors investing into mutual funds through the SIP route.

2. Growing confidence and trust of retail investors in the mutual fund industry because of past returns.

3. Retail investors understanding rupee cost averaging and hence choosing the SIP route for their long-term investments. They have now multiple data points in history to refer to understand the long-term returns given by SIPs of funds which have helped many to create wealth.

What is an SIP? (For beginners or the uninitiated)

Systematic Investment Plan (SIP) is a way of investing in mutual funds through which an investor can invest a fixed amount in a mutual fund scheme of his/her choice at regular intervals.

Like a Recurring Deposit, an investor can invest a fixed amount at regular intervals (monthly or quarterly) through SIP. Rather than investing a large amount one-time through lump sum mode, more investors now prefer to invest smaller amounts regularly through the SIP mode.

SIP to achieve your goals or wealth creation:

The moment you are clear about your financial goal – the long-term ones like child’s education, retirement or medium-term goals like a vacation or a lifestyle product, you automatically start thinking about how much money can save/have to achieve these goals. SIP not only encourages the discipline of regular savings but also uses the power of compounding as a tool to enable creation of potential wealth over a longer time horizon.

SIP leads to better saving habits:

When one starts investing into an SIP, it inculcates healthy savings habit into the investor and as most of the times it is based on a long-term financial goal, it automatically also helps in lowering unnecessary expenditure, especially in young investors.

Easy to operate:

As the mutual fund industry has evolved through the years, the ease of transaction, investing, redeeming, switching, etc have all become more friendly across players in the industry. Moreover, there are many calculators / SIP planner which enable the investor in understanding the investment outlay (on a monthly basis)

All in all, it’s a wonderful and proven way of getting into the equity markets. So if you have still not started, it's time to start now. Start your first SIP!

Disclaimer – The article (including market views expressed herein) is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. The article provides general information and comparisons made (if any) are only for illustration purposes. Investments in mutual funds and secondary markets inherently involve risks and the recipient should consult their legal, tax and financial advisors before investing. Recipients of this document should understand that statements made herein regarding future prospects may not be realized. Recipient should also understand that any reference to the indices/ sectors/ securities/ schemes etc. in the article is only for illustration purpose and are NOT stock recommendation(s) from the author or L&T Investment Management Limited, the Asset Management Company of L&T Mutual Fund (“the Fund”) or any of its associates. Any performance information shown refers to the past and should not be seen as an indication of future returns. The value of investments and any income from them can go down as well as up. The distribution of the article in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of the article are required to inform themselves about, and to observe, any such restrictions.

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