A SIP is a specific amount, invested for a continuous period at regular intervals, generally on a monthly basis. Using this method, an investor buys units of a scheme at a pre-decided frequency.
Consider the below: (Example taken for illustration purpose only)
You decide to start a monthly investment of Rs 1000 every month for the next 12 months starting from Jan 2018.
Now let’s say you invest in Fund XYZ, whose current Net Asset Value (price per unit of the fund) is 10 Rs. So in the first month, you end up buying 100 units of the fund. (Rs 1000/Rs 10 per unit).
Now in the month of February, the fund Net Asset Value goes up to 10.2 Rs. So for your monthly investment in Feb of Rs 1000, this time you get 98.04 units (Rs 1000/Rs 10.2 per unit).
Similarly you can go on like this till December. Now let’s say on 31st December you have accumulated a total of 1123 units, and the fund net asset value is increased from Rs 10 in Jan to Rs 11.4 in December.
Your total investment: 1000*12= Rs 12000
Your current investment value= 1123*11.4= Rs 12800
Profit= Rs 800
A SIP basically helps you to average out your buying price throughout the year, so that ups and down in the market do not affect you. The longer you remain invested in your SIP, the more you units you can accumulate and the more your fund value grows.
In case you need personalised investment advise on which particular funds to choose, you can drop an email or whatsApp to me
Pramada Finserv 