SIP, Systematic Investment Planning, can be voted as a ‘likeable financial planning tool’. For a lot of reasons of course! Two of my personal favorites are:
- Has helped me cultivate the habit of saving every month
- Doesn’t demand too much investment to start with
In life, we always have a plan whenever it comes to getting what’s important. So, why not plan our goals by using an SIP? The sooner we start planning; the sooner we could live lives we always wanted.
Recently though, I came across a solution that’s even smarter when it comes to making investments, called FIT-SIP. Wish to know more? Read on!
What is FIT-SIP?
FIT-SIP is a smart algorithm created by www.5nance.com. It’s a variable SIP, where your investment amount varies every month within a specified range.
Also in FIT-SIP, you end up investing less when the market is high and more when market is down. In the end, you will earn higher than a traditional SIP due to the concept of value averaging.
Monthly investment needed - Minimum Rs. 1500 per month
Lock-in period - No lock-in period, you can withdraw anytime. It will be great if you hold it for more than a year, so that your money can enjoy compounded returns.
(redeeming mutual funds within a year attracts an exit load of around 1%.)
Expected returns - Upto 20%*, back-tested on recommended funds for the last 5 years.
With a simple example, let me explain how market fluctuations will impact your investment in case of a FIT-SIP.
Let’s suppose the monthly target investment set by you is Rs. 5000.
You invest for 3 months and the market falls. The current value is Rs. 15000 (Rs.5000/month * 3 months) has fallen to suppose Rs. 14,000. So to average out in the 4th month, you have to pay Rs.6,000 (Rs.5,000 + difference) instead of Rs.5,000.
And if we take the same scenario during market rise. The current value of Rs. 15,000 (Rs.5000/month * 3 months) has risen to suppose Rs. 16,000. So to average out in the 4th month, you have to pay Rs. 4,000 (Rs.5,000 - difference) instead of Rs.5,000.
Please note the maximum and minimum amount of investment, during the market changes is defined by the investor at the time of investment. For example, if the range defined by you is Rs. 3,000 - 7,000 every month, it wouldn’t go beyond the maximum limit even in case of market fluctuations. It might fall beneath the minimum amount which is good for you.
The ability to alter the plan and buy more when the market is low makes FIT-SIP a smarter investment as compared to an SIP. All you have to do is set the target, you wish to achieve along with your desired returns on investments.
FIT-SIP will make it easier to accomplish your goals by setting a suitable time-frame. Simply, choose from recommended funds that come with a track record of delivering 20%* returns. (back-tested since the past 5 years.)
How do I start FIT-SIP?
Now take quick, easy steps to invest in a FIT-SIP:
- Log on to 5nance.com and choose FIT-SIP under the product category
- Set your target & desired returns on the investment
- The algorithm will identify the period of investment and minimum amount you need to start with your goal
- You can adjust the period of investment. Lower the period, higher the investment and vice versa
- Define a range for investment, minimum and maximum amount you can shell out every month This will help in averaging out the cost
- Pick from the funds suggested by the advisory based on your goal
- The algorithm will monitor and keep your investment aligned to your targeted goal.
- Done! You can sit back and relax while our 5nance team provides regular updates on your investment
Happy Investing!
*Disclaimer: Back- tested for 5 years, Aug 2012 - Aug 2017. Past performance is not a guarantee of future returns. Future Investment tenure should be 15 years.
