Systematic investment planning in mutual funds investments


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Systematic investment planning in mutual funds investments

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Systematic investment planning in mutual funds investments

  1. 1. Systematic Investment Planning Taking One Step at a Time to Creating Wealth over the Long Term Life is a roller coaster ride - full of ups and downs. We all know that we have to save for retirement, children’s education, medical emergencies, family obligations, travel and many more such responsibilities and desires that life brings with it. But no matter how much you save, the truth is - it’s never enough. Ever tried beating a treadmill while running on it? It invariably stays ahead of you. Inflation is pretty much like a treadmill. If the rate of inflation (on an average over the long-term) is greater than the return on your investment you would have lost the race even before it actually began. And as time passes by the gap between your “investment growth” and “cost increase due to inflation” will only widen. If you still don’t believe in the power of inflation just take a look at these numbers; Let’s assume an average 5% rate of inflation over different time periods. Illustration: The illustration above is merely indicative in nature. So if you want your investment returns to win the race against inflation; you need to choose an investment option that has the potential to perform with some momentum over a long period of time. How Do You Beat Inflation? All you need is an investment vehicle which has the potential to deliver returns which are substantially higher than inflation over a long period of time. Did You Know? – Indian equity markets have given an average return of 17.73%* since inception? *Period 2nd Jan. 1980 (value of BSE Sensex: 118.16) to 31st Mar. 2011 (value of BSE Sensex: 19,445.22) Source: MFIE. Past performance is no guarantee of future results. An equity mutual fund scheme with a long-term track record and consistent performance, such as DSP BlackRock Top 100 Equity Fund or DSP BlackRock Equity Fund, could potentially be that vehicle to help you comfortably stay ahead of inflation over time. Your Current Monthly Expenses Today Rs. 20,000 After 25 Years Rs. 67,727 Cost of Higher Education Today Rs. 5,00,000 After 15 Years Rs. 10,39,464 Childs Marriage Expenses Today Rs. 10,00,000 After 20 Years Rs. 26,53,298 10 February, 2012
  2. 2. Systematic Investment Planning contd. Systematic Investment Plan (SIP) – A Step By Step approach to beat inflation Experience may have taught you that tasks done in a planned, disciplined and systematic manner have always delivered the best results in the long term. Wealth creation requires pretty much the same principle…..It’s all about Systematic Investment Planning and maintaining that disciplined approach till you achieve your desired result. You can become a Crorepati – Only if You Start Now! Use the Power of Compounding to your advantage. If you save a small sum of money regularly in equity mutual funds, you can make your money work with greater power and that will have a significant impact on your wealth accumulation. That’s the underlying principle of the Power of Compounding. But you need to start now. Even a seemingly small 5 year delay can cost you the “Crorepati” tag. Let us illustrate how; The illustration above is merely indicative in nature and does not in any manner indicate the performance of any of the schemes of DSP BlackRock Mutual Fund. Please read the SID and SAI Carefully before investing. • Starting a SIP in an equity mutual fund allows you to • take advantage of investing in equities • And also seek diversification. • In addition, it minimizes the effects of investing in volatile markets. • You don’t even have to worry about when and where to invest or even track daily market movements, as there is a professional fund manager to take care of your investments. • Systematic investing significantly reduces the risks attached to market timing. The first 4 steps to potential wealth creation Step 1: Select a mutual fund scheme of your choice from the basket of equity schemes available with DSP BlackRock Mutual Fund Step 2: Select the monthly investment amount. Annualised Return Over 15 Yrs. Annualised Return Over 20 Yrs. Monthly investment Rs 5000 Rs 5000 Total Investment Rs. 9.0 lakh Rs. 12.0 Lakh Assumed annualised return 18% 18% Final corpus Rs. 45.96 lakh Rs. 1.17cr
  3. 3. Systematic Investment Planning contd. Step 3: Decide the Investment period i.e. for how long do you wish to invest on a regular basis. We recommend that for an investor to benefit from the “Power of Compounding” you need to select a longer time period. For e.g. if you are starting a SIP to build a retirement corpus, you should select a period which is equal to the number of years that are left before you retire. Step 4: Decide on the frequency i.e. Do you wish to opt for a monthly or quarterly SIP option? – We recommend a monthly option. How Does Systematic Investment work in a mutual fund? As if the Power of Compounding wasn’t enough, investing with the help of SIPs also offers you the additional benefit of Rupee Cost Averaging. Simply put- You buy more units at lower prices, and less units at higher prices, without having to track the market every day. This is how it works; the amount you invest gets converted into units, depending on the Net Asset Value (NAV) of the scheme you have invested in. Have a look at the table below. It illustrates how over a period of one year if you regularly invest Rs 1000 per month than depending upon the prevailing NAV at the time of purchasing the units in the fund you will buy more units when the NAV is low and less units when the NAV is high. But when you look at the average NAV over one year and compare the same with the average cost that you pay per unit than the average cost per unit that you have paid is lower. This is the benefit of Rupee Cost Averaging. Time (Months) Amount invested NAV per Unit (Rs) Units purchased 1 1,000 23 43 2 1,000 21 48 3 1,000 22 45 4 1,000 19 53 5 1,000 16 63 6 1,000 17 59 7 1,000 17 59 8 1,000 20 50 9 1,000 21 48 10 1,000 19 53 11 1,000 25 40 12 1,000 24 42 Total 12,000 601 Average NAV per Unit over 12 months = (23+21+22+!9+16+17+17+20+21+19+25+24)/12 or Rs 20.34 Average Cost per Unit over 12 months = 12,000/601 or Rs 19.96
  4. 4. How Are Equity Funds Managed contd. The units get accumulated over a period of time. You can stay invested till the time you wish and redeem your units when you wish to exit from the scheme. The units are redeemed at the Applicable (NAV) and you get back your money with returns. You Can Also Opt for A Systematic Transfer Plan - Make a lump sum investment in one of our income funds along with instructions to transfer a fixed sum on a specific date in an equity scheme of your choice. All it requires is a one time instruction on your part which will be followed till such a time that the lump sum investment in the income scheme has been depleted or you have instructed us to switch your investments into another equity scheme within our basket of schemes. We hope that this has helped you understand the benefits of regular investing combined with the power of compounding and convinced you to take your first steps to wealth creation over the long term by starting a Systematic Investment Plan in a mutual fund scheme of your choice.
  5. 5. DISCLAIMER DSP BlackRock Equity Fund (DSPBREF) is an open ended growth Scheme, seeking to generate long term capital appreciation, from a portfolio that is substantially constituted of equity securities and equity related securities of issuers domiciled in India. Entry load: Not Applicable; Exit load: Holding Period < 12 months: 1%, Holding Period >= 12 months: NIL. DSP BlackRock Top 100 Equity Fund (DSPBRTEF) is an open ended growth Scheme, seeking to generate capital appreciation, from a portfolio that is substantially constituted of equity securities and equity related securities of the 100 largest corporates, by market capitalisation, listed in India. Entry load: Not Applicable; Exit load: Holding Period < 12 months: 1%, Holding Period >= 12 months: NIL. Statutory Details: DSP BlackRock Mutual Fund was set up as a Trust and the settlors/sponsors are DSP ADIKO Holdings Pvt. Ltd. & DSP HMK Holdings Pvt. Ltd. (collectively) and BlackRock Inc. (Combined liability restricted to Rs. 1 lakh). Trustee: DSP BlackRock Trustee Company Pvt. Ltd. Investment Manager: DSP BlackRock Investment Managers Pvt. Ltd. Risk Factors: Mutual funds, like securities investments, are subject to market and other risks and there can be no assurance that the Scheme’s objectives will be achieved. As with any investment in securities, the NAV of Units issued under the Schemes can go up or down depending on the factors and forces affecting capital markets. Past performance of the sponsor/AMC/mutual fund does not indicate the future performance of the Schemes. Investors in the Schemes are not being offered a guaranteed or assured rate of return. Investors in the Schemes are not being offered a guaranteed or assured rate of return. The Schemes are required to have (i) minimum 20 investors and (ii) no single investor holding>25% of the corpus of the Schemes. In case of non-fulfillment of the condition of minimum 20 investors, the investor’s money would be refunded, in full, immediately after the close of the New Fund Offer Period. In case of non-fulfillment with the condition of 25% holding by a single investor on the date of allotment, the application to the extent of exposure in excess of the 25% limit would be rejected, and the allotment would be effective only to the extent of 25% limit would be refunded/redeemed. The names of the Schemes do not in any manner indicate the quality of the Schemes, their future prospects or returns. For Schemes specific risk factors, please refer the relevant Scheme Information Document (SID). For more details, please refer the Key Information Memorandum cum Application Forms, which are available on the website,, and at the ISCs/Distributors. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.