S2 EP5 SIP: Is it Worth the Hype?

[00:00:00] Welcome to Axis Moneynomics by Axis Mutual Fund

[00:00:09] The Mutual Fund industry seems to be on a roll in India with the assets under management

[00:00:14] crossing the 50 lakh crore mark very recently.

[00:00:18] Mutual Fund SIP accounts stood at 8.2 crores and the total amount invested through SIPs

[00:00:24] in 524 crossed the 19,000 crore mark.

[00:00:28] What's more, there were almost 50 lakh new SIP registrations in the month of Feb 2024.

[00:00:35] Clearly, SIP seems to be very popular.

[00:00:39] But exactly what is SIP and what are its benefits?

[00:00:44] Hello and welcome to Axis Moneynomics.

[00:00:47] I am Hari from Axis Mutual Fund.

[00:00:49] Today we are going to talk about SIP or Systematic Investment Plan.

[00:00:54] To discuss about SIP, we have with us Shalini from Axis Mutual Fund.

[00:01:00] If you are here for the first time, make sure you follow us and stay on track with your

[00:01:04] personal finances.

[00:01:13] On that note, Shalini, welcome to Axis Moneynomics.

[00:01:17] Thank you Hari.

[00:01:18] Thank you for having me here.

[00:01:20] Shalini, could you quickly tell us what is it that you do at Axis Mutual Fund?

[00:01:25] Sure.

[00:01:26] I am Vice President Product Communications at Axis Mutual Fund and I lead the

[00:01:30] Product Communications Initiative here.

[00:01:32] Great.

[00:01:33] I was talking about the kind of mark and impact that SIPs have made in the country.

[00:01:38] But I wanted to start with asking you a very simple question.

[00:01:41] Could you talk about what exactly is SIP?

[00:01:45] Simply put, SIP is a systematic investment plan and it's the most easiest way to

[00:01:50] begin to take a baby step into the world of investments, particularly in mutual funds.

[00:01:56] What can you do in SIP?

[00:01:57] With this investment mode, you can invest a chosen amount in a mutual fund scheme at

[00:02:02] whatever interval you decide and this amount could be as low as 100 rupees.

[00:02:07] It could be 5000 rupees.

[00:02:09] It could be 1000 rupees.

[00:02:10] It could be a pre-decided amount and even the interval can be decided by you.

[00:02:15] So for instance, you could do it once a month.

[00:02:18] You can do once a fortnight or you could do once a week.

[00:02:20] The reason why we talk about SIP is you are allowed to invest that amount at various intervals

[00:02:27] instead of investing your money or let one go or an lump sum.

[00:02:31] Alright.

[00:02:32] Shalini, I'm reminded of my young days when all of us used to have a piggy bank and

[00:02:37] we used to sort of put the money in this piggy bank on a regular basis.

[00:02:41] Is that similar to what SIP is?

[00:02:43] Definitely.

[00:02:44] So in the piggy bank, the money did sit idle.

[00:02:46] The main difference here is in the world of mutual funds, your money does not

[00:02:49] sit idle.

[00:02:50] It gets invested regularly and offers the scope of wealth creation over time.

[00:02:55] And if you're just getting started with mutual funds and want to start with small

[00:02:58] amounts instead of a lump sum, the SIP route may be worth exploring.

[00:03:01] And you know what?

[00:03:02] The best thing about this is you can start as I mentioned earlier, you can start with

[00:03:06] any amount.

[00:03:07] Even 100 rupees or 500 rupees, 1000 rupees, you can go as high as you want.

[00:03:13] But that's the beauty about SIP.

[00:03:14] You can decide your own amount and then all the more there's no hassle of transferring

[00:03:19] the amount every month.

[00:03:20] The predetermined amount gets debited and invested automatically every month.

[00:03:25] Wow, that sounds very interesting Shalini.

[00:03:29] Could you tell us how does the SIP actually work?

[00:03:31] You talked about what is SIP, how does it actually work?

[00:03:34] So once you've chosen a mutual fund scheme, you have to be sure it aligns with

[00:03:38] your financial goals.

[00:03:40] The amount is invested in the mutual fund you want to purchase on the date

[00:03:43] you select.

[00:03:44] At the end of the day, you'll be allocated the units of mutual funds depending

[00:03:48] on the nav of the mutual.

[00:03:49] Alright, could you also talk about what is this nav, Shalini, for the benefit of our

[00:03:53] viewers and listeners?

[00:03:55] Definitely.

[00:03:56] So at the end of the day in a particular scheme, the end of the day prices are

[00:04:02] accounted for and they are divided by the number of units into that particular

[00:04:06] scheme and that is how you get a nav.

[00:04:09] So is it if I were to put it in a simple way, Shalini, could we call this as

[00:04:13] a price of one unit of a mutual fund scheme?

[00:04:16] Absolutely.

[00:04:17] Great.

[00:04:18] So, as I discussed Shalini so far, it all gives me the feeling that SIP seems to be

[00:04:22] very affordable.

[00:04:23] It seems to be very convenient in terms of the accessibility to how one can

[00:04:28] actually go and invest in a mutual fund scheme and it also seems to be very,

[00:04:32] very easy to do.

[00:04:33] Right?

[00:04:34] Yes.

[00:04:35] Let me also give you an example about SIP so that you can correlate it

[00:04:39] with something.

[00:04:40] So like for instance, if I was to correlate in SIP with the gym membership,

[00:04:44] so just like a gym membership, when you take a membership, you go to the gym

[00:04:47] daily, you start in the beginning, you start small and you get into a

[00:04:51] disciplined habit of maintaining your fitness.

[00:04:54] Similarly, SIP is just a disciplined way of investing.

[00:04:58] You start small and over time you can even increase your investment

[00:05:02] amount.

[00:05:03] This is something like calling up a top of SIP and this is how you can

[00:05:06] correlate it, how you can increase the intensity of your workouts over time.

[00:05:10] Just a similar fashion, you can increase your SIPs over a period of time.

[00:05:13] All right.

[00:05:14] So SIP you are saying is a very, very disciplined way of investing in

[00:05:19] mutual funds and you also talked about SIP top up is one of the features

[00:05:24] where you can sort of increase the investment amount over a period of

[00:05:28] time just sort of like what you have discussed in terms of how you

[00:05:33] sort of increase the intensity of workouts over a period of time.

[00:05:36] That's right.

[00:05:37] Thanks Shalini.

[00:05:38] The other thing that we always keep hearing with regards to SIP is

[00:05:42] the benefit that it offers and one of the benefits you know that people

[00:05:46] generally talk about is that SIP offers what is called as a rupee

[00:05:50] cost averaging.

[00:05:51] Could you sort of explain this for our listeners?

[00:05:56] Definitely Hari.

[00:05:57] Since your investment amount is predetermined, you can buy more

[00:06:00] units when the nav of your fund is down and fewer units when the

[00:06:03] nav is high.

[00:06:04] As your investment amount is fixed, the average cost per unit is lower.

[00:06:08] Now with the potential rise in nav, you stand to gain more.

[00:06:11] Also with SIPs, you can unleash the power of the eight wonder of the world.

[00:06:15] Yes, I'm talking about compounding.

[00:06:17] If you stay invested in SIP for a long period, the potential returns

[00:06:21] generated over time is added back to the principal amount.

[00:06:25] This in turn has the scope to generate more returns.

[00:06:28] Repeat this process over time and you'll get to witness the magic of compounding.

[00:06:32] Superb.

[00:06:33] I think compounding is what all of us have sort of learned in school

[00:06:37] and you're saying that SIP offers you this benefit of compounding.

[00:06:41] And if I were to sort of just connect it to what you discussed,

[00:06:43] Shalini, SIP therefore can help individuals to achieve their

[00:06:48] financial goals, be it a dream vacation, it could be buying a new

[00:06:53] gadget or maybe it could even to look at funding their retirement.

[00:06:58] Is that true?

[00:06:59] Even a small SIP has got the potential to help individuals

[00:07:02] reach their financial goals, Shalini.

[00:07:04] Sure, let's say you want to set aside a sum for your dream car or a

[00:07:09] dream home or your retirement or to fund your children's education.

[00:07:14] So for all of these, you can invest specific amounts monthly in your SIP

[00:07:18] for the next desired period, number of years that you desire

[00:07:23] using an SIP calculator like the one we have on accessmf.com

[00:07:27] and that calculator will help you find how much you need to invest.

[00:07:31] Now that we have laid the basics of SIP for you,

[00:07:34] it is your turn to get started on your investment journey.

[00:07:37] Remember, just like your workouts can be tailored to your body requirements,

[00:07:41] your investment plan should also be tailored to your financial goals.

[00:07:45] We spend considerable time to find the perfect show to binge watch, right?

[00:07:49] Then we should also make sure to spend some time to check out

[00:07:52] a risk profile and select an investment that fits our requirements.

[00:07:56] Thank you so much, Shalini.

[00:07:57] I think that was super informative and we look forward to having you again on the podcast.

[00:08:03] Thank you, Hari.

[00:08:03] Pleasure's all mine.

[00:08:05] Well, that brings us to the end of this episode of Access Money Nomics.

[00:08:09] I'm sure Shalini's wisdom on SIP will help each one of us to start SIPs

[00:08:16] and take this journey of SIPs and mutual funds in a big way in the future.

[00:08:22] Thanks for tuning in.

[00:08:23] I'm sure you found this episode very helpful.

[00:08:26] Don't forget to subscribe and feel free to share it with your friends

[00:08:30] while exploring the world of investing.

[00:08:32] Remember to follow our podcast, Access Money Nomics,

[00:08:36] so you don't miss out on any interesting topics.

[00:08:39] Until then, this is your host, Hari, signing off.