How many benefits can a monthly investment plan have?(Count them and see!)

1.Become a disciplined investor.

Being disciplined -it's the key to investing success.With a SIP -Systematic Investment Plan or a MIP -Monthly Investment Plan, you commit an amount of your choice to be invested every month.Think of each MIP payment as laying a brick.One by one,you'll see them transform into a building.You'll see your investments accrue month after month.It's as simple as giving at an auto debit instruction to your bank for a fixed amount in a scheme of your choice.It's the perfect solution for irregular investors.

2.Reach your financial goals.
Imagine you want to buy a car a year from now,but you don't know where the down -payment will come from.By investing an amount of your choice every month,you can plan for and meet your financial goals,like funds for a child's education or a comfortable post -retirement life.

3.Take advantage of dollar cost averaging.
Most investors want to buy stocks when the prices are low and sell them when prices are high.But timing the market is time consuming and risky.To illustrate this we'll compare investing the identical amounts through a MIP and in one lump sum.
Imagine John invests $1000 every month in an equity mutual fund scheme,starting in January.His friend James,invests $12000 in one lump sum in the same scheme.The following table indicates how their respective investments would have performed from Jan to Dec.
John's Investment James' Investment
Month NAV Amount Units Amount Units
Jan-10 9.35 1000 107.01 12000 1284.11
Feb-10 9.40 1000 106.39
Mar-10 8.12 1000 123.11
Apr-10 8.75 1000 114.29
May-10 8.01 1000 124.81
Jun-10 8.93 1000 112.04
Jul-10 9.10 1000 109.87
Aug-10 8.31 1000 120.34
Sep-10 7.57 1000 132.14
Oct-10 6.46 1000 154.75
Nov-10 6.93 1000 144.28
Dec-10 7.60 1000 131.58
Total 12000 1480.60 12000 1284.10


As seen in the table,by investing with an MIP,you end up buying more units when the price is low and fewer units when the price is high.However,over a period of times these
Market fluctuations are generally averaged.And the average cost of your investment is often reduced.
At the end of the 12 months,John has more units than James,even though they invested the same amount.That’s because the average cost of John’s units is much lower than that of James.James made only one investment and that too when the per-unit price was high.
John’s average unit price =12000/1480.60 =$8.10
James’ average unit price =$9.35

4. Grow your investment with compounded benefits.
It is far better to invest a small amount of money regularly, rather than save up to make one large investment.This is because while you are saving the lump sum,your savings may not earn much interest.

Imagine John was 20 years old when he began working.Every month he saves and invests $5000 till he is 25 years old.The total investment made by him over the last 5 years is $300,000.

James too started working at age 20 ,but does not invest any money.He gets a large bonus of $300,000 at age 25 and decides to invest the entire amount.

Both of them decide not to withdraw these investments till they turn 50.At 50.John’s investments have grown to $46,68,273 whereas James’ investments has grown to $3617084.(Figures based in 10%pa interest compounded monthly).

John’s small contributions to a MIP and his decision to start investing earlier than James has made him wealthier by over $100,000 .

5. Do all this effortlessly.
Investing with an MIP is simple and easy.All you need is an auto debit instruction to your Bank for the required sum to be debited every month.However, do read the terms and conditions of the MIP before enrolment.
All you have to do after that is sit back and watch your investments accumulate.