literature review on systematic investment plan

The Comparative Study on Systematic Investment Plan and One Time Investment Plan in Mutual Fund

16 Pages Posted: 24 Sep 2021

Harshal Borgaon

Research Scholar, Centre for Management Studies, Jain University, Bengaluru; Global Business School; Global Business School, Hubli

Date Written: June 30, 2020

In few years Mutual Fund has emerged as a tool for ensuring ones financial well being. Mutual funds have not only contributed to the India’s growth story but have also helped families tap into the success of Indian Mutual fund Industry. As information and awareness is increasing day by day and more people are harvesting the benefits of investing in mutual funds. Globally, there are thousands of firms offering various of mutual funds scheme with different investment objectives. Today, mutual funds collectively manage almost as much as or more money as compared to banks. The research paper’s main objective is to compare both Systematic investment plan and One time investment and helps the investors to make best choice. It attempt to give a very simple investment strategy for the investors who are not experts in the field but want to make money from the market without much hassle in their path. In this paper, analysis is done by using compounded annual growth rate (CAGR) for lump sum investment plan and extended internal rate of return(XIRR) for Systematic investment plan. The conclusion drawn from this research paper is that one time investment plan is better as compared to systematic investment plan for those investors who has lump sum amount to invest.

Keywords: Mutual Funds, MF in India, Systematic Investment Plan, SIP

Suggested Citation: Suggested Citation

Harshal Borgaon (Contact Author)

Research scholar, centre for management studies, jain university, bengaluru ( email ).

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Investment intention and decision making: a systematic literature review and future research agenda.

1. Introduction

2. methodology, 2.1. the review protocol—prisma, 2.2. formulation of research questions, 2.3. systematic searching strategies, 2.3.1. identification, 2.3.2. screening, 2.3.3. eligibility, 2.4. data extraction, 3. results and discussion, 3.1. bibliometric analysis, 3.2. weight analysis, 3.3. content analysis, 3.3.1. personal factors, 3.3.2. social factors, 3.3.3. market information, 3.3.4. firm-specific factors, 3.3.5. product-related factors, 3.3.6. other factors, 4. recommendations and future research agenda, 4.1. theory, 4.2. context, 4.3. constructs, 4.4. method, 5. conclusions, author contributions, institutional review board statement, informed consent statement, conflicts of interest.

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Share and Cite

Che Hassan, N.; Abdul-Rahman, A.; Mohd Amin, S.I.; Ab Hamid, S.N. Investment Intention and Decision Making: A Systematic Literature Review and Future Research Agenda. Sustainability 2023 , 15 , 3949. https://doi.org/10.3390/su15053949

Che Hassan N, Abdul-Rahman A, Mohd Amin SI, Ab Hamid SN. Investment Intention and Decision Making: A Systematic Literature Review and Future Research Agenda. Sustainability . 2023; 15(5):3949. https://doi.org/10.3390/su15053949

Che Hassan, Norhazimah, Aisyah Abdul-Rahman, Syajarul Imna Mohd Amin, and Siti Ngayesah Ab Hamid. 2023. "Investment Intention and Decision Making: A Systematic Literature Review and Future Research Agenda" Sustainability 15, no. 5: 3949. https://doi.org/10.3390/su15053949

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Power of Compounding in Systematic Investment Plan (SIP

2022, Journal of Xidian University

There is an eighth wonder of the world is Rule of Compounding. Compounding is the process whereby interest is credited to an existing principal amount as well as to interest already paid. Compounding thus can be construed as interest on interest-the effect of which is to magnify returns to interest over time, the so-called "miracle of compounding." When the principal includes the accumulated interest of the previous periods and interest is calculated on this then they say its compound interest. In this paper the author tried to find out the power of compounding in mutual fund selection by investing in good performing funds among equity types of Mutual Funds SIP fund-based performance in different Mutual Fund Asset Management Companies (AMC). The aim of this paper is to focuses on tentative assumptions in that the Systematic Investment Plan investing in mutual fund schemes by debiting a fixed amount from the bank account every month or quarter. It helps to invest money gradually. In this paper author was choose five reputed Mutual Funds companies and tried to find out last three year SIP returns with the help of Groww Application, Money Control, AMFI and SEBI websit.

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Learn Mutual Funds What is Systematic Investment Plan (SIP)?

What is Systematic Investment Plan (SIP)?

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A systematic investment plan is a disciplined approach to investing in mutual funds. SIPs offer a disciplined and convenient way for investors to build wealth gradually, benefit from rupee cost averaging, and harness the potential of compounding over the long term.

What is a SIP?

SIP (Systematic Investment Plan) is a method of investing in mutual funds  where an investor invests a fixed amount of money at regular intervals (typically monthly or quarterly).

This approach is well-suited for investors looking to achieve various financial goals, such as wealth creation, retirement planning, or funding education while providing flexibility to adapt to changing financial circumstances.

How SIP Works?

Before you set up your SIP, there are a few essentials you need to know about how SIP works.

There are four stages to investing in SIP from the beginning to the point where your funds are invested in a mutual fund scheme:

Select a mutual fund scheme

As your first step in the SIP investment journey, you need to select a mutual fund scheme based on your goals, risk appetite, investment strategy, fund performance, and other factors.

Select the investment frequency

The next step in your SIP investment journey is to choose an investment frequency you feel comfortable with. The most common choice, especially among salaried investors, is a monthly frequency since they receive their salary monthly. However, if you have reasons to select a different frequency, you may choose to invest weekly, quarterly, semi-annually, or annually.

Set up SIP with a mutual fund scheme

Setting up your SIP is a simple process once you’ve picked a mutual fund. On ET Money, go to your chosen mutual fund, and click on invest. If you’re a first-time investor, complete your KYC and enter the bank details along with your SIP contributions and frequency, and you’re done. The process has been illustrated in detail in a later section.

Automatic debits and unit allotment based on NAV

Once everything is set up, money will be debited from your registered bank account. It will be debited each month based on the date you selected while setting up the SIP. This is an automated process. The funds will keep debiting from your bank account based on the frequency you entered while setting up the SIP.

After the money is debited, you’ll soon receive acknowledgment about your funds being invested. The acknowledgment also includes the number of units you’ve been allotted based on the NAV (net asset value) . The number of units allotted for each contribution may differ because the NAV changes every day.

Benefits of SIPs

Rupee-cost averaging, through regular fixed investments, helps reduce the impact of market volatility on your portfolio by buying more units when markets are low and fewer when they are high.

SIP benefits from professional fund management, potentially leading to better results than individual stock picking.

SIP promotes financial discipline by encouraging consistent, fixed investments over time.

SIP leverages the power of compounding, and reinvesting returns to boost your portfolio’s value over time.

Power of Investing Early

In investing, the “Power of Starting Early” refers to the belief that if you start investing in an early stage of your life, then you can accumulate more wealth in the long term.

The earlier you start saving, the more time your money has to compound, and even if you start with a small amount, you can add up to large sums over time. This is possible through the power of compounding.

Compounding is the process through which you earn interest on the principal amount as well as on the interest part. This process continues throughout the investment period and generates a snowball effect, which helps you to generate a higher corpus in the future.

Starting early allows time and compounding to work in your favor, allowing you to reach greater financial security and freedom in the future. So, start early, be consistent with your investments, and diversify your investments per your risk tolerance to achieve your financial goals.

Types of SIP

Now that a lot of ground has been covered on what SIP is, how SIP works, and the benefits of SIP, let’s talk about the types of SIPs you can opt for.

Fixed SIPs are the plain-vanilla version of SIPs. You choose an amount, and a date till which you wish to contribute, and the rest of the process is automated.

Top-up SIPs are great for investors who want to increase their SIP contributions periodically. An example of where top-up SIPs make a lot of sense is when your income continues to increase every year.

Perpetual SIP

Perpetual SIPs are just fixed SIPs sans tenure. Once registered, your bank account will be debited with the amount of the SIP contribution unless you instruct the fund house to stop withdrawals.

Flexible SIP

It offers you the flexibility to change the amount per contribution or skip a few contributions if you so choose. There are two possible reasons an investor may want to change the contribution amount or skip a contribution. First, your contributions through SIP are adjusted based on the market’s overall outlook. If the market is valued higher, your monthly contributions through SIP would be reduced and increased again once markets are correct and valuations look attractive. Fund houses do this based on a predecided valuation matrix.

Things to Consider While Starting SIP

Before you start your first SIP, there are a few things you should consider the following things:

Investment goals

It’s best not to begin investing by calling “growing wealth” your goal. Tie your investments to important milestones of your life that may require a large amount of money — for instance, a bigger home, your child’s college, or your retirement. This will help you keep tabs on your objectives, and performance of how each of your investments is performing, and make it easier to take corrective action when required.

Time horizon

Once you have a goal in mind, you know how many years you’d want to achieve it. If you have a long time horizon, you could take on more risk than if you had a short time horizon. If you’re closer to retirement and don’t want to take on many risks, you could stick to short-term mutual fund investments.

Risk appetite

Another aspect to consider is how much risk you are willing to take. Assess the risk linked with the mutual fund by examining the volatility of its returns. It’s important to verify that the fund’s risk profile matches your personal risk tolerance. By considering your risk tolerance, you can select SIP options that match your financial goals

Mutual fund category

Selecting a mutual fund category requires careful consideration of your time horizon and risk tolerance. For those with a long-term outlook and higher risk tolerance, categories like focused funds or small-cap funds offer the potential for greater returns. Conversely, debt funds are suitable if you lean towards lower risk or have a shorter time horizon. Hybrid funds might be ideal for those seeking a balanced approach.

Trial run your strategy

Once you’ve figured all the elements out, try to do a trial run for your investment over your time horizon via an online calculator to see how much you’ll generate as returns and how much your maturity value will be. This will help you understand if your investment strategy will actually help you achieve the goal you’re investing for.

For simulating your returns, you could use an SIP calculator to see how much you’ll generate given a certain amount of monthly contribution made over a certain time and the expected rate of return

Which Are the Best SIP Funds?

The best SIP funds for an investor depend on several factors the investor’s risk profile and the fund’s return consistency, among others. As of this writing, the following are the best SIP mutual funds to invest in:

*Last updated as on 27th Jun 2024

View All Best SIP Funds

Final Thoughts

Starting SIP could be one of the most rewarding parts of the investment journey. It gives you ample flexibility and minimizes the time and effort you’d otherwise need to put into managing your investments. If you’re young, now is a good time to start your SIP. Remember, time is on your side; make the most of it.

Related Calculators

• Lumpsum Calculator
• SBI SIP Calculator
• HDFC SIP Calculator
• Axis SIP Calculator

Frequently Asked Questions

No, SIPs do not have a fixed maturity period like other investment options such as fixed deposits, PPF, etc. They are ongoing investments in which you regularly invest and continue for as long as you want. But, as per the recent update by the National Automated Clearing House (NACH), effective from October 1, 2023, you can set SIP for a maximum duration of 30 years only.

SIPs do not mature like traditional investment options, but you can redeem them anytime, except ELSS funds. So, when you redeem your SIP investment, you receive the corpus as per the fund’s applicable NAV (Net asset value). However, there may be an exit load, which asset management companies charge. And, if you want to continue your SIP, then you have to renew your SIP.

SIP is just a method to invest in a mutual fund scheme. SIP in itself is not an investment product like FD, gold, or mutual fund. So, whether a SIP is safe or not will depend on the scheme in which you are investing.

When you invest in SIP, every installment is a new investment. So, the ideal way to measure SIP returns is to calculate XIRR , which is essentially the average annual return of each of your installments. If you want to calculate how much money you can make via SIPs over a certain period, you can download the SIP Calculator App .

No, Mutual fund SIPs are not tax-free. If you sell your mutual fund units at a profit, you will need to pay tax on your gains (not the principal amount). How much tax you need to pay depends on the scheme in which you have invested and the period for which you held the mutual fund units before selling them.

Given the volatility in equities, you should look to invest in Equity Fund SIPs only for 7+ years. For 5 years, you can do SIP in Balanced Advantage Funds. As these funds invest in a mix of equity and debt, they dynamically move from one asset class to the other. They try to fall less during market corrections while capturing the market upside during rallies. You can look at some of the best BAFs on ET Money with their ranking.

You can stop your SIP whenever you want. All you need to do is go to the investment platform through which you are investing and follow the instructions to cancel the SIP.

The short answer is yes. In most schemes, you can withdraw your invested SIP amount whenever you want. The only exceptions are ELSS, Retirement Savings Fund, and Children Savings Fund. ELSS has a lock-in period of 3 years, while the remaining two have a lock-in period of 5 years. As every SIP installment is considered a fresh investment, you can only withdraw after the due lock-in period. Besides, you cannot withdraw anytime from close-ended funds.

The short answer is no. Through SIPs, you are essentially investing in mutual fund schemes. So your investments can fluctuate with market volatility. In fact, if the market sees a steep fall, you may see negative returns on your SIPs. But the good thing is that historically SIPs in diversified equity funds have never given negative returns if someone has invested for more than 10 years.

Yes, you can start a SIP with a small amount of money. One of the major advantages of the SIP is its flexibility, which allows you to start your investment with a very small amount. You can start your SIP with as low as Rs 100. 

When you invest in mutual funds via SIP, there are some charges that you will have to bear. Some of these charges are:   Expense Ratio : It represents the asset management expense charged by the fund houses for managing the mutual funds. It is charged as a percentage of AUM (assets under management). Exit Load : It is the fee charged by the fund houses when you redeem your investments.

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