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Explaining SIP, STP, SWP for first-time investors
1. Brief the concept of SIP,STP,SWP in mutual
funds to a first time investor.
Presented By:
Reshi sharma
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2. Area Of Work
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Profile analysis Of first time investor
Brief of Systematic Investment Plan (SIP)
Benefits of SIP
Brief of Systematic Transfer Plan (STP)
Why and When to use STP
Brief of systematic withdrawal plan
Conclusion
3. Consideration of first time investor are likely to be in
one of the following 3 situations:
Scenario 1 –Have extra cash in bank which want to deploy for getting
a better return than the savings/current account.
Scenario 2 – want to save tax on income/salary. Tax saving mutual funds
offer a good alternative to not only save tax but also invest in equity.
Scenario 3 – Purpose is to invest in equity but a low risk mutual fund (tax
saving not important).
How to invest :For making first investment, there are
multiple options
Go directly to the mutual fund and invest – online or offline.
Go to one of the registrars .through them – online or offline.
Use online platforms such as Unovest which helps you invest in
direct plans of mutual funds.
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4. Brief of Systematic Investment Plan(SIP)
Systematic Investment Plan a simple way to invest in Mutual fund
and create wealth.
We can also do SIP in ELSS (Equity Linked Saving Scheme) to save tax under
section 80 C.
SIP works on the principle of "Rupee Cost Averaging" where in you invest a
fixed amount every month, irrespective of the market movements.
It gives flexibility to choose a desired scheme or to with draw in parts.
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5. Benefits of SIP
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Affordability
Power of Compounding
Rupee cost averaging
Other Benefits: Auto debit facility across major cities in India, regular
account statements, redemption/dividend proceeds directly credited
into the bank account
6. HOW DOES ITS WORK(SIP)
• Rupee cost averaging – generally gives a lower unit cost than market average
• Investing fixed amounts makes sure you purchase more units at a lower price and less at a
higher price
• On the other hand if the markets raise, investor will accumulate less units.
Average Unit price = Total Amount invested / Total Units accumulated
• Returns are not guaranteed but for the longer horizon of 10 to 15 years, they have been quite
good. And their range is between 12–15% per annum.
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7. How to Invest in SIP
• Fill the Common application and Auto-debit form.
• Investor selects scheme in which he/she wishes to invest via SIP along with the frequency, amount,
tenure etc.
• Choose from weekly/fortnightly/monthly/ quarterly frequency.
• 1st installment in the form of a cheque, auto-debit thereafter
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8. Brief of Systematic Transfer Plan (STP)
• STP is a variant of SIP. STP is essentially transferring investment from one asset or asset
type into another asset or asset type. The transfer happens gradually over a period.
• Transfer can be weekly, fortnightly, monthly and Quarterly
• Types of STP: Fixed STP ,Capital Appreciation, Flexi STP
• STP is a risk mitigation strategy. It will protect you from any adverse loss to a large extent.
• STP is a way to 'systematically' invest in an equity mutual fund, while the rest of money
'grows' in a liquid fund (some recommend the dividend reinvestment option) or in an
arbitrage fund (dividend reinvestment option).
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9. Benefits of STP (Systematic Transfer Plan )
Consistent return – Returns in STP are pretty consistent as money
invested in debt fund earns interest till the time it is transferred to
equity fund.
Averaging of cost – STP has some integral features of systematic
transfer plan (SIP).
Rebalancing portfolio – An investor’s portfolio should be balanced
between equity and debt. STP helps in rebalancing the portfolio
by reallocating investments from debt to equity or vice versa.
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10. STP will make sense from DEBT -> EQUITY when markets are may very volatile
and you don’t want to take risk with your money in a short span of time, If you
invest through STP in markets and markets fall or have lots of volatile moves,
then this situation will be better than the one time investment option. This is
still better than putting money in Bank and doing a SIP, because at least you
money is earning some returns on debt part in STP .
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Why and When to use STP
11. SWP allows the investor a certain level of independence from market
instability and helps in avoiding market timing.
In This plan The investor can reinvest the redeemed cash in another portfolio
or use it as a source of regular income. It is suitable for retirees who are looking
for a fixed flow of income.
SWPs are especially useful for retirees who are looking for a fixed stream of
income.
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Brief of Systematic Withdrawal Plan (SWP)
An SWP (Systematic Withdrawal Plan) allows an investor to withdraw designated sum
of money and units from the fund account at pre-defined regular intervals
Instead of selling all the units at once, spanning the income across multiple
intervals can lower the total tax. It is a tax efficient way of receiving regular
income.
12. Benefits of SWP (Systematic Withdrawal Plan )
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SWPs help an investor customise the cash flow to suit his needs.
Help saving an investor from market fluctuations. As regular
withdrawal average out return value.
Tax Benefit Rather then selling all the units at once, spreading the income across
multiple intervals can lower the total tax. It is a tax efficient way of receiving regular
income.
13. Conclusion
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SIP STP SWP
What Monthly Investment of
fixed amount in MF
Scheme
Transfer of money
from one MF Scheme
to another
Fixed monthly
redemption of MF
scheme.
Why Helps discipline and
spread out
investments.
Help rebalance
portfolio or change
asset allocation.
Helps exit investments
for secondary monthly
income.
How Your money gets
debited from bank
account and used to
buy MF units
The Fund house sells
MF units and buy MF
unit for another
scheme.
The fund house sells
MF Units every month
And credit the money
in your bank account.
When Ideal for all
investments through
out life
Ideal when you are
few years away from
goal or during market
volatility.
Ideal for retirement or
while using the money
for fund goals like
children education.
Best For Initial investments. Re-investments. Exiting investments.
