The Systematic Investment Plan has been maintaining its popularity among investors over the years because of its disciplined nature. Investors find it convenient as it allows them to invest a smaller amount periodically instead of a lump sum amount. Additionally, it also lets them invest intelligently without having to put too much at risk. However, it is important to understand all the aspects of this before starting to invest in order to gain maximum profit at minimum risk.
What are SIP Funds?
A Systematic Investment Plan is a simple method of investing in mutual funds, which builds the habit of saving and aids in wealth generation. It requires investors to keep investing a fixed amount on a regular basis. Investors get to decide the amount and the intervals for their investment. The amount can be as low as Rs. 500 and the amount can be deposited on a weekly, monthly or yearly basis.
The whole process of investing via systematic investment plan is automated and no manual work is necessary. A fixed amount is deducted from the investor’s savings account on predefined intervals. The amount can be transferred via post-dated cheques as well. The SIP is flexible in nature as it allows the investors to increase the amount and even discontinue to invest as per their convenience. In addition, the investor can either choose to receive the returns on a periodic manner or in a lump sum.
Advantages and disadvantages of SIP Funds
Besides providing a systematic approach towards investment and thus helping individuals in becoming a regular investor, SIP comes with some other perks, which are mentioned below:
- Rupee Cost Averaging: Investing a fixed amount on a regular basis through SIP ensures that you purchase more shares when the prices are low and contrarily fewer during high price. Thus the cost of your shares gets averaged out, reducing the effects of short-term market inflation on your investments. This is called Rupee Cost Averaging
- Power of compounding: Power of compounding ensures higher returns on investment made over a long period than returns on one-time investment. When you regularly invest over a long period through SIP, in addition to getting returns on the principal amount, you earn money on the returns as well. The compounding effect thus,helps you in building wealth steadily.
- No need to time the market: You can start investing in SIP anytime you want since there is no need to time the market. The Rupee Cost Averaging balance the ups and downs of the market, ensuring the easy flow of returns.
- Start small: The most convenient feature of SIP is that you can start investing with a low amount as Rs.500 and continue to earn returns.
Who should invest in SIP Funds?
Anybody who wants to keep investing on a regular basis can opt for Systematic Investment Plans. SIP is the perfect choice for investing in mutual funds for beginners, who have just started to invest and can not afford to take risks. Individuals who are not willing to think much about the market and want a hassle-free investment plan should definitely choose SIP. Besides, it is also convenient for investors who want to start with a small sum .
Is Kotak Select Focus Fund a good SIP investment?
Now coming to one of the best plans for SIP, let’s discuss about Kotak Select Focus Fund and see how it has performed over the years, and whether it can be considered as an investment choice.
Kotak Select Focus, also called Kotak Standard Multicap Fund, has been shown a promising record of growth since its inception on 11th September 2009. It has earned success by making the optimum use of the investor’s investments. The money under the Kotak Select Focus Fund is invested in companies with steady growth and strong business module, which makes the scheme trustworthy.
The Kotak Select Focus Fund has 91.31% of its investment in Indian stocks. Among those investments, 63.3% is in large-cap, 19.84% investment is in mid-cap and 1.75 % is in small-cap. This scheme of Kotak mutual fund was launched with both Dividend and Growth variables. The scheme requires investors to keep investing throughout their tenure. However, they will get the returns in a lump sum at the end of the tenure.
How has Kotak Focus performed over the year?
As on 17th January 2020, the Net Asset Value of Kotak Select Focus fund is 38.344. The scheme has a good return rate of 11.9% for the year 2019. In the last ten years, the scheme has generated 121.81% absolute returns and 15.21% annualised returns. Kotak Standard Multicap fund growth over the year has been stellar. Further, you can invest in Kotak Select Focus Fund Direct for a better return.
Systematic Investment Plan comes with its perks and is a great way to invest in equity funds to minimise risks and create wealth. The Kotak Select Focus Fund is no exception. Investing in this fund via the SIP route will free you from the worry of timing the market as well as the effort of remembering to invest regularly.
There are many platforms available now that facilitate SIP investments online and also allow users to take multiple SIP actions. Make sure you research thoroughly about the scheme you wish to invest in. It is always better to go according to your research and investment objectives instead of basing your decisions on recommendations.
Related article you may find interesting: “What is an Investor?“