1.
5 things to consider
before investing in SIP

2.
Systematic Investment Plan
• Systematic Investment Plan (SIP) is a smart and convenient mode of
investing money into mutual funds
• SIP is a planned approach which allows you to invest a certain pre-
determined amount at a regular interval (weekly, monthly, quarterly, etc.)
• It not only helps in inculcating the habit of saving but also building wealth
for the future.
• Remember: SIP is a plan/mode of investing and NOT a product by itself!!

3.
Why
SIPs?
Power of
Compounding
Encourages
Disciplined
Savings
Helps
achieve
long term
goals
No need to
time the
market
Ensures
Flexibility

4.
5 things to consider
before investing in
SIPs
Identify your dreams & goals
Identify your Investment Horizon
Set apart your Investment Amount
Understand your Risk Appetite
Select the Fund House carefully

5.
#1 Identify your dreams & goals
• Before you start investing, it is crucial to ask yourself 2 important questions
“Where am I? And where do I want to reach?”
• Understanding your current financial position and listing out the instruments
you are currently investing in, is important when you start planning your
finances.
• It is also necessary to check the proportion in which your current
investments are laid out (equity, fixed-income products, gold, etc.)

6.
• After understanding your current financial standing, note down your key
financial goals and the target value of each goal
• Your goal could be buying a new house, a new car, your child’s higher
education or marriage, planning for retirement, etc.
• This will help you realize whether your goal is wealth generation or safety of
your funds or having a well stocked emergency fund, etc. And this will help
you further understand which investment options would suit you best.

7.
#2 Identify your Investment Horizon
• “By when do I want to get there?” should be the next question you need to ask
yourself.
• Assigning a timeline to each of your goal will help you in choosing the most
suitable type of mutual fund
• Equity funds are best for long-term goals (10-plus years), hybrid funds for
medium-term goals (4-8 years) and conservative fixed-income funds for
goals that fall within the next 2-3 years.

8.
• For example, if your goals are short term in nature (ranging from one month
to three years) like buying a car or house, going on a foreign vacation, house
repairs and so on it is better to invest in relatively safer funds such as Debt
funds, Gilt funds, etc.
• If your time horizon is more than 7-10 years, then SIPs in equity mutual
funds will enable you to create a good corpus and the compounding factor
will come in play in your portfolio.

9.
#3 Set apart your Investment Amount
• While deciding the amount of SIP you are willing to invest regularly, it is
essential to keep in mind the target value of each of your goals and increase
it by a reasonable inflation rate to arrive at the amount that will be required
to successfully fulfill your goal.
• For example, if you are saving to buy three years later a car that costs
about Rs.5 lakh today, assuming 5% inflation in car prices, you should target
having around Rs.5.79 lakh at the end of three years.

10.
#4 Understand your Risk Appetite
• Analyzing your risk appetite will enable you to understand the amount of risk and
type of risk you can tolerate to meet your investment objectives. It will thereby
enable you to select the best product given your risk tolerance
• Assessing your risk appetite depends on multiple factors such as your age, your
occupation, your current savings, time left to reach your goal set and so on.
• While it may be attractive to allocate your investment in the asset class known to
offer highest returns, which is equities, it is very important that they are aligned to
your risk appetite

11.
11
Risk hierarchy of Mutual Funds
Money Market
Funds
Gilt Funds Debt Funds
Hybrid
Funds
Equity Funds
Aggressive
Growth Funds
Balanced
Funds
Diversified
Debt Funds
Gilt Funds
Money Market
Funds
Flexible Asset
Allocation
Growth and
Income Funds
High Yield
Debt
Focused
Debt
Diversified
EquityRisk
Level
Type of Fund
Equity
Income

12.
#5 Select the Fund House carefully
• It is the decisions taken by your fund house that will take you closer to your
goals and secure your future wealth creation. So it is extremely critical that
you choose a dependable investment partner.
• The important parameters to look at while selecting a fund house are:
• Size of mutual fund corpus
• Historical performance of the firm
• Track record of your fund manager

13.
13
Other Investment Considerations
Expense Ratio
Track this ratio, invest
in the firm charging
lower ratio
Post-tax Returns
How much is really left for post tax ?
Liquidity
You get your money back
When you want it
Convenience
Easy to invest, disinvest
and adjust to your needs

14.
Albert Einstein once said, "Compound interest is the eighth wonder of
the world. He who understands it, earns it... he who doesn't... pays it."

15.
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