An Overview of the Systematic Investment Plan
Investors are of many types. Some have the ability to invest a substantial amount at one go, while others don’t. The latter category of investors likes to invest small amounts at frequent intervals.
This initiative gives them two advantages. First, they do not face any financial strain. Second, they have a sound investment at their disposal in due course of time.
The Systematic Investment Plan (SIP) mechanism addresses these needs effortlessly. It allows you to invest a fixed amount towards your chosen mutual fund scheme at predetermined intervals.
This interval is at your discretion, and you have complete freedom to choose an option that meets your criterion. Currently, these options are available in two formats - monthly or quarterly basis.
A Systematic Investment Plan has a close resemblance to a bank's RD or Recurring Deposit scheme. However, SIP has additional features. For example, you can choose to invest in different mutual fund schemes under SIP.
In other words, these schemes may pertain to equity markets or debt instruments. SIPs are often offered by mutual fund houses in India.
Customers find SIP very tempting and lucrative. For them, it is the ideal alternative to create wealth. They justify this by narrating numerous benefits:
- It brings a financial balance.
- Imbibes a true sense of discipline in you to approach your investments, and
- Offers a helping hand to achieve all your long terms goals like:
1. Buying a house.
2. Retirement planning.
3. Children’s education, and more.
ICICI Mutual Fund SIP is selling like hotcakes due to such advantages. Apart from that, you will find several options to suit your needs and requirements. For instance, you can find schemes spanning across different time periods.
Likewise, you can select a scheme belonging to one specific sector, such as technology.
What is an ICICI SIP Calculator?
- You will be able to make calculations for the rough future value of all your SIP investments.
- You will get appropriate suggestions regarding different SIP-based ICICI mutual fund schemes. This will facilitate you to make a selection according to your preferences.
- It gives you enough freedom to calculate a staggering compounding growth for your savings.
- As you take the systematic investment plan route, the calculator displays the growth of your investment in each stage.
- By using the calculator, you find yourself in a comfortable situation. For instance, it will give you an idea about the future value of the investments.
- You can correctly plan your investment as you can decide how much you wish to invest, the tenure that fits you, and more.
- The calculator offers you the perfect guidance in terms of the correct amount you ought to choose to start a SIP.
- You get a sound indication of the amount you have to keep aside for a specific time period without causing any financial hassles.
How does the ICICI SIP Calculator work?
The good thing about the ICICI SIP Calculator is that it works in an automated format. Thus, you are saved from keeping a track record about the timing and amount involved. In other words, it will perform all the maths on your behalf.
This calculator works wonderfully. For instance, it lets you know:
The returns that will accrue to you between two given dates. For example, you can know details about if you go about investing the same amount and on the same date every month.
It saves you from undertaking painstaking manual calculations.
All you need to do is provide information like:
The mount you intend to invest, and
The applicable period.
Once done, you are immediately provided with the returns you will receive. If mid-way through your calculation, you wish to make certain amendments in your preferences, you can do that as well.
This is no ordinary data for you! It will enable you to make quick comparisons with returns between numerous SIPs. Consequently, you can find yourself better placed to make an alternative decision like investing in an FD.
You can always have the last laugh by providing mere two pieces of information, right? Investing can't get better than this!
Why should you invest in SIP?
When you opt for a systematic investment plan (SIP), it puts you in an advantageous position. It will enable you to:
Discover a convenient route of investing your money exclusively for mutual funds.
It gives the freedom to eliminate a lump sum amount required to start your journey regarding mutual fund investment.
You stand a great chance of reaping benefits like:
Invest a smaller amount regularly.
Choose the mutual fund scheme of your choice.
It moulds you to become more disciplined in your approach to making sound investments.
Your tiny investment translates into significant savings, even before you realise it and spend it.
As you imbibe the financial discipline in you slowly and steadily, you end up realising the returns later.
What starts on a miniature scale transpires to be a significant amount in the future.
How is ICICI SIP return calculated?
As needed, you keep investing a small amount every month out of the money available to you. Your money keeps growing and produces predetermined returns. The calculator permits you to unearth how much your SIP investment will earn you in the future.
The million-dollar question is – how is the return calculated in the first place?
There is a simple way to make this calculation. It is calculated on a lump sum deposit you might have made. Here, this figure remains constant, and you calculate the return on the said amount.
There is a specific formula designed to arrive at this figure:
FV = P x ({[ 1+ i ] ^ n-1 } / i ) x (1+i)
Here, every term has a special meaning:
n = Total number of payments made by you till the time you make the calculation.
P = Amount that you invest.
FV = Future Value ( This is the amount to derive after maturity).
i = The rate of interest periodically.
For example, you make a monthly investment of Rs. 5,000 carrying an interest rate of 14%. Further, you opt for a tenure of 10 years. Your return in this circumstance will be as described below:
FV = 5,000 x ({[ 1 + 0.14] ^ 120 – 1} / 0.14) x (1 + 0.14)
FV = Rs. 13,10,000
Total returns = Future Value – Invested Amount throughout 10 years
Total returns = Rs. 13,10,000 – Rs. 6,00,000
Total returns = Rs. 7,10,000
In other words:
M = The actual amount you get on maturity
P = The small amounts you keep on investing at regular intervals
n = The actual number of payments that has been made by you so far
I = the periodic rate of interest applicable
Illustration with an example:
Suppose you invest Rs. 1000 every month for a complete year, i.e. 12 months and the rate of interest applicable is 12%.
The monthly rate of return will be :
12%/12
1/100=0.01
It simply means you will receive approximately ₹12,809 in a year.
Just bear in mind one thing. The rate of interest on Mutual Funds is always subject to market risks. Read the offer document to understand all terms and conditions better before you invest.
Let us take another example to calculate the return:
For instance, you choose to invest Rs 1,000 every month in a mutual fund scheme of your choice by using the systematic investment plan or SIP option.
Suppose this investment will go on for ten years and carries a rate of return of 8% per year. Your return will be :
i = r/100/12
= 8/100/12
= 0.006667.
Best ICICI Mutual Fund SIP Plans to Invest
As an investor, the safety and security of your money are paramount to you. Therefore, it is prudent not to tie down all your money in one specific mutual fund. After all, it is well known that “ Do not keep all the eggs in the same basket. If the basket falls, you end up losing all the eggs”.
Never mind, the market watchdog SEBI realises the worries and apprehensions of all investors. It has framed stipulated guidelines to calculate all risks involved.
Fortunately, several ICICI Mutual Fund SIP plans are available in the market. Each offers a different tenure and a different rate of return.
Some of the most popular schemes include:
Fund Name | 3 Years Returns | Total SIP Investment (Annually) |
ICICI Multi Cap Growth Fund | 3.53% | Rs.60,000 |
ICICI Maximiser Fund V | 4.6% | Rs.60,000 |
ICICI Bluechip Fund | 6.1% | Rs.60,000 |
ICICI Multi Cap Balanced Fund | 5.52% | Rs.60,000 |
Depending upon your preferences and requirements, you will find them in various categories.
For instance, in case equities find acceptance from you, go for the most sought-after plans like:
ICICI Prudential Technology Fund Growth
ICICI Prudential Small Cap Fund Growth I
ICICI Prudential Value Discovery Fund Growth
ICICI Prudential MidCap Fund Growth
ICICI Prudential Infrastructure Fund Growth
ICICI Prudential Large & Mid Cap Fund Growth
ICICI Prudential Focused Equity Fund Growth
ICICI Prudential US Bluechip Equity Fund Growth
ICICI Prudential Dividend Yield Equity Fund Growth
ICICI Prudential Exports and Other Services Fund Growth
Similarly, if you’re looking forward to such schemes from an investment perspective, you can opt for:
Fund Name | 3 Years Returns | SIP Maturity Value (20 Years) |
ICICI Opportunity Fund | 6.19% | Rs.25.1 lakhs |
ICICI Multi Cap Growth Fund | 3.53% | Rs.22.9 lakhs |
ICICI Maximiser Fund V | 4.6% | Rs.22.9 lakhs |
ICICI Bluechip Fund | 6.1% | Rs.21 lakhs |
Some prefer to go for the liquid fund schemes. In this respect, these are the most preferred options:
Just learn more about the grade of risk involved as prescribed by SEBI. For instance, some schemes come within the definition of Low to Moderate risk category and vice-versa.
Frequently Asked Questions
Q1. Which ICICI mutual fund is best for SIP?
Answer: If you are looking for the best returns and enhanced growth, go for the equities fund. The most popular picks are ICICI Prudential Smallcap Fund, ICICI Prudential Value Discovery Fund, ICICI Prudential Technology Fund, etc.
Out of these ICICI Prudential Technology Fund ensures long-term capital appreciation.
Q2. How can I open a SIP in ICICI?
Answer: The process to open is simple:
Step 1 - Gain an understanding of the objective of investment and your risk appetite.
Step 2 - Select a mutual fund according to your preferences.
Step 3 - Choose the date of SIP.
Step 4 - Decide on the tenure of SIP.
Step 5 - Make a decision on which alternative suits you the most – offline or online.
Q3. Can I do SIP for six months?
Answer: Well, there is no restriction to making short-term investments in mutual funds. Just give importance to the different categories and subcategories of the scheme in question. Each scheme is different and contains its merits and demerits.
Some are ideal for short-term objectives, while some are specially designed for long-term goals. Subcategories of debt funds are profitable for one year or less.
Q4. Can I pause/withdraw my SIP in ICICI?
Answer: The pause/withdraw option for SIP is not permitted by all fund houses. Nevertheless, ICICI Prudential Asset Management Ltd gives you a choice to exercise this option. You can get in touch with them and ideally give a month's notice, comply with certain form fill-up norms, and you are all set to go!
Q5. What are the types of SIPs available?
Answer: Following are the different types of SIP that are presently available in India:
Regular SIP
Top-up SIP
Flexible SIP
Perpetual SIP
Trigger SIP
SIP with Insurance.
Multi SIP.
Out of these, Flexible SIP has become a common choice. It allows making necessary adjustments based on your financial conditions.