LEARNING ABOUT

SIPs MADE EASY

INDEX
Introduction 01

SIP basics 02

Net Asset Value (NAV) 03

SIP vs Lump Sum 05

Power of compounding 06

Rupee cost averaging 07

Goal-based investing through SIPs 08

Types of SIPs 09

How to choose a SIP 10

How to start a SIP 11

Know Your Customer (KYC) process 12

Mistakes to avoid while starting a SIP 13

Missing SIP payments 14

Withdrawing SIP amount 15

Taxation of SIPs 16

SIP vs STP vs SWP 17

Myths about SIP 18

Quiz 19
INTRODUCTION
Just as little drops of water make the mighty ocean, every small
investment contributes to making a large amount of wealth. And this is
why Systematic Investment Plans in Mutual Funds are so preferable.

What are SIPs? How do they work? What are their advantages? -
Such questions and many more will be answered in this eBook.

Happy reading!

01
LET’S CLEAR THE BASICS FIRST?
SIPs EXPLAINED!
A SIP is a mode of investing in Mutual Fund Schemes
regularly. SIPs can be daily, weekly, fortnightly,
monthly or quarterly. You get to invest a
predetermined, fixed amount at predetermined
intervals in Mutual Fund Schemes. When you start a
SIP, your chosen SIP amount gets deducted from your
bank account and gets invested in the Mutual Fund
Scheme of your choice at chosen intervals.

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Example

Say, Mr Smart started a monthly SIP of `2000 in Equity Funds on the

1st of January. So, let’s say, even when he is having a good time in
Maldives the next month, `2000 will still be transferred to his Mutual
Fund investments from his bank account. This will happen every month
until he stops it. What a smart way of investing for future trips and
many more goals!

02
IS `2000 THE PRICE OF HIS SIP?
LET’S FIND OUT!
Say, Mr Smart has `100 and wants to buy ball pens. The cost or value of each ball
pen today is `10. Thus, he can have 10 ball pens with the money he possesses.
However, when its cost rises to `20/pen, he can only have 5 ball pens.

Similarly, how many units of a Mutual Fund Scheme you can own depends on the
Net Asset Value (NAV) of the Fund. This abbreviation is simply the value of each
Mutual Fund unit.

Math time

MARKET OR FAIR VALUE OF SCHEME’S INVESTMENTS + CURRENT ASSETS

- CURRENT LIABILITIES AND PROVISION
NAV =
NO. OF UNITS OUTSTANDING UNDER SCHEME ON THE VALUATION DATE

Assets include the cumulative investments of the fund at the market value, amount
of receivables, cash and cash equivalents, etc. Expenses include accrued
expenses, management costs, outstanding payments, etc.

For Example

TOTAL ASSETS: `20 CRORE

TOTAL EXPENSES: `10 CRORE

TOTAL NUMBER OF UNITS: 20 LAKH

THUS, NAV = 20 CRORE -10 CRORE /20 LAKH = RS. 50/-UNIT

The NAV keeps changing from time to time. So, when your SIP amount gets credited
to your Mutual Fund Scheme’s bank account, units get allotted to you based on your
amount and the Fund’s NAV on that day. Thus, you will not get the same number of
units every time.

03
 EXAMPLE
Say, you want to invest `60,000 in a Mutual Fund Scheme. Let’s see how the unit
allotment works in the case of SIPs as well as a lump sum investment.

SIP amount Units allotted Units allotted in

Month NAV (`) in the case the case of a lump
(`)
of SIPs sum investment

January 10,000 100 100 600

February 10,000 90.91 110

March 10,000 95.24 105

April 10,000 100 100

May 10,000 103 97.09

June 10,000 105 95.24

Total units 607.33 600

The above calculation is only for the purpose of illustration

As you can see, the NAV kept changing and so did the number of units allotted.

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` 04
LUMP SUM VS SIPs
WHICH IS BETTER?
While you can invest at once if you have a good risk appetite and surplus funds
at your disposal, choosing the SIP route offers several benefits. These are:

LIQUIDITY
One of the key benefit of investing in Mutual funds is liquidity, as
you can redeem your accumulated units at any point in time, subject
to applicable exit loads. Tax-saving mutual funds are an exception to
this as they have a lock-in period of 3 years.

FINANCIAL DISCIPLINE
Regular saving and investing can keep you from irrational spending
and, in turn, help you bring financial discipline in life.

POWER OF COMPOUNDING
When you invest regularly with a long-term perspective, you allow
your money to compound and grow.

RUPEE COST AVERAGING

You invest during different market cycles. Thus, your investment cost
gets averaged out over time.

The last two benefits seem unclear?

Relax! Read on!

05
POWER OF
COMPOUNDING
Want to understand the power of compounding?
You have two options.
Go to Shimla, get on the top of a slope, and throw
a small snow ball and see what it turns into.
Read below

Saving you the time, money and energy, here’s what compounding means.
As per this concept, you not only earn returns on your principal investment but also
earn returns on the returns that accrue on it. The power of compounding may help
you turn a small sum into a large amount over time. Thus, you must start investing
early, keep investing regularly and stay invested for a long time.

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06
RUPEE COST
AVERAGING
Markets keep fluctuating. When you invest through SIPs, you invest during different
market cycles. SIPs accumulate more units at relatively lower costs in the bearish
markets depending on the NAV, and then benefit from the eventual up move in the
markets. This is known as rupee cost averaging.

Isn’t SIP a good way of tackling market volatility? Oh yeah!

Takeaway

1. Every day is a good day to start a SIP. Thanks to rupee cost averaging,
you need not time the market. With SIPs, time in the market is better than
timing the market.

2. Continue your SIPs even during volatility. Markets are characterized by

ups and downs. The key is to ignore the fluctuations and have a long-term
investment perspective with a clear focus on your long-term goals.

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07
HOW TO CHOOSE
THE RIGHT SIP AMOUNT?
There is no one-size-fits-all when it comes to choosing the right
SIP amount. You can decide on a sum based on your situation.

Before choosing your SIP amount, consider factors such as your

`
income, expenses, liabilities, lifestyle, etc.

Another important thing to consider is your goals. Doesn’t it

make sense to invest as per your goals?

Not sure if you have enough money to set aside for SIPs?

Don’t let your limited savings stop you from investing in Mutual Fund Schemes. You
can start a SIP with an amount as low as `500*. That said, a higher amount may
help you build wealth faster. Luckily, there is no upper limit for investing in SIPs.
So, start with what you can and increase your SIP amount gradually.
*The minimum SIP amount may vary across AMCs or schemes. Please refer to Scheme Information Document of the
respective scheme/s.

Goal based investing through SIPs

For Investment Goal With The Investment And Your Risk The Suitable Mutual
Such As horizon of Appetite Being Fund Scheme May be

Saving for Emergency 1-3 years Low Debt Fund

Planning for retirement 5 or more years High Equity Fund

Saving Tax 3 or more years High ELSS

Buying a house 3-5 years Medium Hybrid Fund

Different goals have different values and time frames. Thus, it makes sense to have a
separate SIP for each target.

There are different types of Mutual Fund Schemes to suit different goals and investment
tenures. For example, you can start a SIP in Debt Funds for your short-term goals, in
Hybrid Funds for your medium-term goals and in Equity Funds for your long-term goals.

08
MUTUAL FUNDS HAVE TYPES
AND SO DO SIPs.
HERE ARE THE MOST
POPULAR ONES.
Step up or Top up SIP

You can increase your SIP amount by a fixed sum or % at specified intervals.
You can opt for this if you expect annual increments. You can also look at
step up SIPs if your loan is about to close and you know you will have extra
money at your disposal. Simply put, this type of SIP helps you make better
use of your savings.

Flexi SIP

You can increase or decrease your SIP amount as per your convenience.
This becomes helpful when you face financials lows. Even with limited
savings, you can stay invested and let your money compound.

Trigger SIP

You can set a trigger event for the Fund House to take actions. For example,
you can set a trigger that if your investment makes a profit of `2 lakh, the fund
house must exit the scheme. Such SIPs are more suitable for experienced
investors who understand market movements better.

Perpetual SIP

Your SIP continues by default. It won’t stop unless you decide to do it

specifically. This is good because a long-term investment may help you beat
volatility and create wealth.

These types further add to the flexibility of SIPs.

Note: Not all AMCs offer all types of SIPs.

09
HOW TO CHOOSE
A SIP?
You will have to consider two categories of aspects:

01. Individual aspects

 Financial goals

 Financial state

 Risk appetite
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 Investment tenure
`

02. Fund-related aspects

 Past performance

 Fund manager’s track record

 Expense ratio

 Exit load

 Taxation on redemption
`

10
HOW TO START
A SIP?

Here's how to get started with SIPs

Identify your financial goals and investment objective.

Decide on your asset allocation and investment horizon

according to your risk-return appetite.

Select the suitable fund category

 Equity Fund  Debt Fund  Hybrid Fund

Complete your KYC (Know Your Customer) procedure.

 For eKYC (Online), keep the following ready.
You can also complete your eKYC via Aadhar number.
 Identity proof: Self-attested PAN copy
 Image of your signature on plain paper
 Aadhaar Number.

Once, you're through with the KYC process, choose the suitable
Mutual Fund scheme for your goal from the selected category/fund.

Determine your SIP frequency, date and amount.

Submit the application form after completing the details.

And you are done!

11
UNDERSTANDING
THE KYC PROCESS
As the name suggests,
KYC or Know Your Customer helps the Fund House establish your identity.

KYC is a one-time process that you must complete mandatorily before investing in
Mutual Funds. For the same, you must submit your PAN card and any one identity
proof and address proof such as your voter card. Simply put, KYC is your passport
to investments. It can help you achieve your dreams via Mutual Funds.

Again, you can complete this offline too

but e-KYC is much more convenient. Here’s what you need to do:

STEP 1

Visit the website of the Fund House

STEP 2

Download the e-KYC form

STEP 3

Upload the duly filled form along with your documents,

cancelled cheque, and image of your signature on a plain paper

STEP 4

Keep your phone, laptop or any other device handy for

photo and video verification.

Your task will become quicker, if you opt for Aadhaar-based

e-KYC. Your credentials will be validated by sending an OTP to
your mobile number that is registered for your Aadhaar.

To become KYC-compliant,
scan this QR code.

12
MISTAKES TO AVOID
WHILE STARTING A SIP

Timing the market

SIPs invest across market movements and help you average out your cost.
Thus, you need not wait for the ‘right time’ to start a SIP.

Stopping SIPs in volatile markets

For the reason stated above, instead of panicking you must believe in the
potential of markets, focus on your long-term goals and stay invested.

Not choosing a suitable amount

Choosing a significantly high amount may be unwise if you are unsure of
your finances in the long run. Go for an amount that you can invest
comfortably and gradually increase the amount.

Not linking SIP to your goals

Random investments do little or no good. Have a SIP for each goal and
keep chasing it.

Not reviewing your SIP

Periodic portfolio reviews can help you gauge the performance of your
investment and, in turn, help you ensure that you are on the right financial track.

Not keeping the SIP date near the pay day

Choosing a date far away from your pay day may lead to the failure of
SIP payments.

13
WILL THE MUTUAL FUND INVESTMENT
BE CANCELLED IF A SIP PAYMENT IS MISSED?

Missed the payment once? No problem!

Missed the payment twice? No problem, again!

Missed the payment thrice? Uh oh! Problem!

If you miss three consecutive SIP payments, only then your SIP will stand cancelled.
However, you must check with your bank if they penalise you for dishonouring the
payment even once.

BUT, BUT, BUT…..

If you are unable to continue your SIP, that doesn’t necessarily mean you will
have to miss your payments or discontinue it. You can simply pause your SIP and
avoid penalties or cancellation. Once your finances are better, you can restart
the same SIP.

14
CAN SIPs BE
WITHDRAWN AT ANY TIME?
You must understand two things here:

 Lock-in period  Exit load

Lock-in period
If a Mutual Fund Scheme has a lock-in period, it means you cannot
withdraw your investments before that tenure ends.

Exit load
Certain mutual fund schemes may have an exit structure,
wherein if an investor withdraws the investment before the stipulated
exit period, then such redemption may attract an exit load.

In the case of SIPs, each instalment will be treated as a separate investment.

Thus, each instalment will have a different holding period when you redeem your
investments. So the exit load will be calculated accordingly.

Say, you start a monthly SIP of `1000 on the 1st of January, 2021 and redeem it on the
17th of January, 2022. In this case, only your first instalment will complete one year and,
thus, not attract any exit load. However, the remaining instalments will be subject to an
exit load as their holding period was less than a year. Typically, equity funds charge an
exit load for the investment withdrawn before 1-year.

You may note that redemptions made from mutual funds are always on first in first out
(FIFO) basis wherein units bought first are redeemed first.

15
YOUR SIP WILL ALSO
BE SUBJECT TO TAXES!
The taxation of your SIP will depend on:

 The type of Mutual Fund Scheme

 The holding period

Mutual Fund Schemes are either taxed as Equity Funds or Debt Funds.

TAXATION OF EQUITY FUNDS*

Realised gains on Equity Mutual Funds for the units held for a year or less
are considered Short-term Capital Gains and are taxed at 15% plus
applicable cess and surcharge. Realised gains on Equity Mutual Funds for
the units held for more than a year are classified as Long-term Capital
Gains. If these gains are less than `1 lakh/year, you can enjoy them
tax-free. If these gains exceed `1 lakh/year, they will be taxed at 10% plus
applicable cess and surcharge.

TAXATION OF DEBT FUNDS*

Realised gains on Debt Mutual Funds are added to your income and taxed
as per your slab rate.

Note: For the purpose of

taxation, each SIP instalment
will be treated as a separate
investment and the holding
period will apply accordingly.
Tax applicability only at
redemption /switch-outs
*Taxation as per prevailing tax-laws. Please
contact your finance /tax advisor before
investing.
16
KNOW THE OTHER
TWO FAMOUS
ABBREVIATIONS IN THE
MUTUAL FUND INDUSTRY

Let’s understand the difference.

Particulars SIP SWP STP

Full form Systematic Investment Systematic Withdrawal Systematic Transfer

Plan Plan Plan

Meaning It allows you to invest a It allows you to It allows you to transfer

fixed amount in Mutual withdraw a fixed funds from one Mutual
Fund Schemes at amount from your Fund Scheme to
regular intervals existing Mutual Fund another of the same
investments at regular Fund House
intervals

Purpose Helps become Helps create a Helps rebalance

financially disciplined secondary source of portfolio
and spread investments inflow

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17
DIFFERENCES ARE CLEAR.
LET’S BUST SOME
MYTHS NOW?
If your left palm is itchy, you are about to get wealthy
– Myth or fact? Who knows!

But what we do know is that the following things about SIPs are
nothing but myths:

MYTH FACT
#1 SIP can’t be modified
midway
You can modify your SIP by filling and
submitting the online SIP modification form.

You can start a SIP with

#2 SIP is for big investors
as low as `500*

SIPs can help tackle the volatility associated

#3 SIP can only be done
for Equity Funds
with Equities. But you can start SIPs in
Debt Funds & Hybrid funds too.

Bull or bear, invest without fear.

#4 SIPs should be avoided
during bull phase You need not time the market with SIPs.

*The minimum SIP amount may vary across AMCs or schemes. Please refer to Scheme Information
Document of the respective schemes.

18
TEST WHAT YOU READ
SO FAR – QUIZ TIME!
Now that you know so much about SIPs,
how about testing your knowledge before you leave? They are easy ones,
we promise!

1. What is the full form of SIP?

A: Systematic Investing Plan B: Systematic Investment Plan

C: System Investing Plan D: System Investment Plan

2. What is the minimum SIP amount usually?

A: `500 B: `50

C: `550 D: `5000

3. Which of the following is an advantage of SIP?

A: Power of compounding B: Low investment amount

C: Rupee cost averaging D: All of the above

4. Which of the following is not a type of SIP?

A: Perpetual SIP B: Trigger SIP

C: Step up SIP D: Open SIP

5. What is the upper limit for SIPs?

A: `2 lakh/year B: `2 lakh/month

C: No limit D: `1.5 lakh annually

5- C 4- D 3- D 2- A Answers: 1- B
19
DISCLAIMER
To know about the KYC documentary requirements and procedure for change of address, phone number, bank details,
etc. please visit https://www.utimf.com/servicerequest/kyc. Please deal with only registered Mutual funds, details of
which can be verified on the SEBI website under "Intermediaries/market Infrastructure Institutions". All complaints
regarding UTI Mutual Fund can be directed towards service@uti.co.in and/or visit www.scores.gov.in (SEBI SCORES
portal). This material is part of Investor Education and awareness initiative of UTI Mutual Fund.

SIP is a feature offered for disciplined investment of a certain amount on a pre-decided date in a specific mutual fund
scheme, regularly over a period of time.

Calculation on goal calculator is for illustration purpose only and not an indication of the performance of any schemes.
Calculation is based on assumed rate of return and actual return may vary. Performance may or may not be sustained in
future.

Investors should not treat the information on taxation as any advice relating to legal, taxation, investment or any other
matter and also in view of the individual nature of the implications, are strongly advised to consult their tax/ legal
consultant with respect to the tax implications arising out of their participation in the Schemes or otherwise.

Equity Linked Savings Scheme (ELSS) is an open-ended equity linked saving scheme with a statutory lock in of 3 years
and tax benefit. Minimum investment in equity & equity related instruments - 80% of total assets (in accordance with
Equity Linked Saving Scheme, 2005 notified by Ministry of Finance). As per the present tax laws, eligible investors
(Individual/HUF) are entitled to deduction from their gross total income, of the amount invested in equity linked saving
scheme (ELSS) upto `1,50,000/- (along with other prescribed investments) under Section 80C of the Income Tax Act,
1961. Subject to prevailing tax laws.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS,

READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.