Systematic investment plans, or SIPs, are a popular investment terminology. SIPs have been touted as being the ideal way to invest and build wealth over the long-term. Every investment expert talks about SIPs in such a way that investors might think they are the cure to all ills. But is investing systematically really as great as it is made out to be?
Let’s look at the benefits of systematic investment plans to answer that question.
Disciplined investing approach
Protect yourself against market volatility
Timing the stock markets is one of the toughest things for an investor to do. Often, it is also not necessary because of the risks it carries. Investors often worry about when and how much to invest. SIPs take this worry away. A systematic investment plan is a disciplined way of investing a fixed amount at regular intervals. By eliminating the need to constantly monitor the markets, it helps protect the portfolio against market volatility.
Rupee cost averaging
Buy more when the price is low, less when the price is high
When you are investing via SIPs, you are investing a fixed amount on a fixed date. If on that date, the stock price is high, you will have a lesser number of shares. And vice versa. This ensures that you invest more at lower prices and less at higher prices, and hence your overall cost of acquisition gets averaged out.
Magic of compounding
It’s all about time in the market, not timing the market
The key to becoming wealthy is not only to start investing early but to also continue investing and stay invested. When you stay invested, you start earning returns on not only the new amounts you invest but also on the returns you have already earned. This is called compounding and it works like magic to help you build wealth.
How to invest via SIPs in smallcases?
Buy & Start SIP
With smallcases, it is easier than ever to adopt the disciplined investing approach. You can now buy a smallcase and start a SIP reminder for it in just 1 click!
2 important things:
- Check whether your broker provides for SIP orders to be placed automatically; you can see your broker FAQ section for details.
- For manual SIP, you will be notified about the SIP due date via email, WhatsApp, and push notification. To set up WhatsApp reminders, go to your Account tab and toggle WhatsApp notifications on.
You can start an SIP for an amount which is less than the minimum investment amount for the smallcase, if the minimum investment amount is more than ₹10000. smallcases where the minimum investment amount is less than ₹10000, the SIP amount is always less than or equal to the minimum investment amount.
You can buy a smallcase and set an SIP reminder in 1 click!
As soon as you confirm the investment amount while buying a smallcase, you’ll see a popup with the ‘Monthly SIP reminder’ option checked. You just have to click on ‘Buy & Start SIP’ and a SIP due reminder will automatically be sent to you. Earlier, starting an SIP required a separate process and was only possible after buying a smallcase. Due to a merger of the Buy + SIP flows, it’s much more easy & seamless now.
By default, the SIP frequency is monthly and the amount is the minimum SIP amount for that particular smallcase. You can edit your SIP configuration any time as you like.
The minimum SIP amount for a smallcase is intelligently calculated by our proprietary algorithm.
How can I place the minimum investment amount for SIP below the overall investment amount?
We are not buying all the stocks in one go like we do for the first time you invest in the smallcase. Instead, for SIPs, we are splitting the purchase across subsequent SIPs. Based on our proprietary logic, we are selecting individual stocks to be bought in each SIP instalment. Since the number of stocks purchased is less, the SIP amount can now be less than the minimum investment amount of the smallcase.
Understanding the proprietary SIP algorithm with an example
The below table shows the composition on the day of investment and on your 1st SIP instalment. The change in weights is due to the change in stock prices over time.
To simplify, let’s consider an equal-weighted basket. The logic would work the same way for custom weights too.
Initial Investment amount: 1,00,000
Monthly SIP instalment amount: 20,000
1. Calculate the number of shares based on the Total amount (Current value + SIP amount).
On the day your SIP is due, the current value of your investment is 1,12,000. We calculate the total amount as (Current Value + SIP amount) = 1,32,000
As per the above amount and the weights on T0, the number of shares to be bought will be calculated.
2. Calculate additional shares to be bought.
We then calculate the difference from existing holdings to form your SIP instalment
3. Determine the SIP amount.
The stocks that have deviated below from the ideal composition are preferred. The actual instalment amount is calculated as New no. of shares * Market price of each stock.
4. In the next SIP instalment, the same steps are repeated
Editing SIP configuration
- Click on ‘Investments’
- Click on your invested smallcase
- Click on ‘Edit SIP’
- Set the Frequency, SIP amount and SIP date as desired
- Click on ‘Save SIP Settings’
How do SIPs on smallcases made easier?
You can start investing systematically through SIP reminders. This is important in the purview of your long term goals. On every due date, we will send you an email, and WhatsApp & push notification through which you can easily pay your SIP instalment. No hassle of extra clicks for starting an SIP, it’s all in one place making the process simpler & faster.
You have the flexibility to choose the SIP amount. So, if you initially want to start with small SIP amounts in your invested smallcase, you can do so. Once you get more comfortable, you can increase the SIP amount.
Work towards your financial goals systematically and with planning. Get an SIP today!