SIP

In Mutual Fund one option is to invest a lump sum . The other option is to invest regularly through a Systematic Investment Plan (SIP), a scheme where you can periodically invest a fixed sum, which could be as low as Rs. 500/- per month. Considered as one of the ideal low-risk methods of wealth accumulation, SIP helps investors over come the fluctuations of equity investment. Some consistently performing mutual fund companies include HDFC, Franklin India, Reliance Mutual Fund, Birla Advantage, UTI balanced, Kotak, ICICI and Morgan Stanley.

Investing through SIP makes timing and cycles of the share market totally irrelevant. With SIP, you invest a fixed amount regularly. Therefore, you end up buying more units when the markets are down (when the NAV is low) and less units when the markets are up (when the NAV is high). This is called rupee-cost averaging. SIP works as a disciplined investment method as it forces you to buy even when the markets are low, which is actually the best time to buy.

MONTH 1: Rs.1000/- NAV:Rs.10/- UNITS:100
MONTH 2: Rs.1000/- NAV:Rs.9/- UNITS:111.11
MONTH3: Rs.1000/- NAV: Rs.10/- UNITS:100
MONTH 4: Rs.1000/- NAV: Rs.11/- UNITS:90.9

Total investment: Rs.4000/-
Number of units purchased: 402.01
Therefore average cost per unit: Rs.9.95