Systematic Investment Plan (SIP) is a convenient method of investment in which you can invest a pre-determined amount of money in mutual funds at regular intervals. The investment can be made on an annual, half-yearly, quarterly, monthly or weekly basis. It is a pre-planned, systematic method of investing in mutual funds which enables you to earn regular returns on your investments. How SIP works? A Systematic Investment Plan offers flexibility to you in terms of managing assets and investing money in mutual funds. This method is convenient since the pre-fixed amount will be debited automatically from your bank account and this will be used to make an investment in a particular mutual fund portfolio. A Net Asset Value (NAV) will be assigned to you based on the existing market conditions. When an investment is made, additional units of an asset available under the mutual fund scheme will be purchased and added to your mutual fund account. This also ensures that the units accumulated are bought at different prices. Therefore, you will get benefitted from the purchase due to the Compounding factor and Rupee-Cost Averaging as well. Documents required The following documents are required for starting a SIP:-
  • Application form: This is the most basic requirement. If you wish to start a systematic investment plan (SIP), you need to fill in two forms. One to open an account with the mutual fund and the other to specify your SIP details such as frequency, monthly installment amount, and so on. If you are investing afresh in a mutual fund scheme, both the above-mentioned forms are necessary.
  • KYC Compliance: In order to start SIP, your PAN has to be verified by under the Know Your Customer (KYC) norms of the Government of India. You can check your KYC compliance or register yourself for KYC through the website of CDSL Ventures Limited (CVL) by following this simple procedure-
Visit and click on ‘Inquiry on KYC’. A small window will pop up on your screen that will ask for your PAN card number. Fill it up and submit. If your KYC is approved, you will get a notification on the screen saying so. You need to take a printout of it as proof. If you are already KYC-compliant, you need to submit the KYC acknowledgment letter or a copy of the KYC-compliance page.
  • Proof of identity: Any of the following documents are acceptable as proof of identity –
  1. PAN with photograph
  2. Aadhaar
  3. Passport
  4. Voter’s ID card
  5. Driving licence
  6. Any other identity card/document with applicant’s photo, issued by- Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc. to their Members; and Credit cards/Debit cards issued by Banks.
  • Proof of address: Any of the following documents can be submitted as proof of address –
  1. Aadhaar
  2. Driving licence
  3. Passport
  4. Voter’s ID card
  5. Ration card
  6. Registered lease/sale agreement of residence
  7. Flat maintenance bill
  8. Insurance copy
  9. Utility bills such as landline telephone bill, electricity bill or gas bill, less than 3 months old
  10. Bank account statement/passbook, less than 3 months old
  11. Self-declaration by High Court and Supreme Court judges, giving the new address in respect of their own account
  12. Proof of address issued by Bank Managers of Scheduled Commercial Banks/Multinational Foreign Banks/Gazetted Officer/Notary Public/Elected Representatives to the Legislative Assembly or Parliament/a document issued by any Government or Statutory Authority
  13. Identity card/document with address, issued by any of the following: Central/State Government and its Departments. Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities and Professional Bodies such ICAI, ICWAI, ICSI, Bar Council etc. to their Members
  14. Proof of address in the name of the spouse is also acceptable.
  • Third party declaration for minors: If the investor is a minor, parents are allowed to invest on behalf of them. For this, you need to fill out a third party declaration form. Documents that establish the parent’s relationship with the child should also be submitted.
  • Power of Compounding: The concept of the power of compounding comes into picture when Investment through SIP happens at regular interval with a longer time frame. The power of compounding underlines the essence of growing money by investing it at an early age for a longer duration. Let’s take an example,Hence, it is evident that, with a 10-year time difference, Person B gains more than twice the returns gained by Person A.
  • Rupee-Cost Averaging: Timing the market is a very difficult task; it’s very hard to predict the market. Rupee cost averaging is a mechanism which does not require the timing of the market. Since you are investing a fixed amount each month via SIP, irrespective of the market movement, you end up buying more units in the mutual fund when the price is low and fewer units when the price is high. Over long-run the volatility of the market will not affect the average cost per unit.
Let’s take an example of ‘X’ who invests 1,000 per month through SIP starting Aug 1, 2017. By investing through SIP route, the average cost for ‘X’ would be 9.95 (5000/504), whereas the market average will stand at 10.20 (51/5).
  • A disciplined approach towards savings: SIP encourages regular savings so that investments can be made at the chosen frequency. This helps you to develop the discipline of investing on a regular basis without taking too much risk at once. Investing smaller amounts at regular intervals proves to be much easier in the long-run, than a single lump sum amount.
  • Tax benefit: under section 80C of the Income Tax Act, deductions can be availed through SIP into ELSS, which limited to maximum investment of 1.5 lakh under section 80C.In case of Equity mutual fund (the scheme, which invests more than 65% into Equity related instrument), tax on Long-term (more than one year) capital gain on is nil, whereas short-term (less than one year) capital gain is 15%.Debt mutual fund (the scheme, which invests debt or money market instruments), Long-term (more than one year) capital gain on is 10% without indexation & 20% with Indexation, whereas short-term (less than one year) capital gain, is taxed as per tax slab.
  • Flexibility: Investors can invest in mutual funds over a prolonged period of time. However, there is no time limit during which an investment has to be made. The investors can also choose to discontinue the plan at any point in time. The pre-determined amount that is invested regularly can also be changed as per the investor’s choice.
  • Long-Term Gains: Due to the benefits of compounding and rupee-cost averaging, you can get good returns on investment in the long-term.
  • Convenience: The SIP mode of investment is very convenient and hassle-free. You can place a standing instruction to your bank and the SIP amount will be auto-debited from your bank account.
So, in short, SIP is one of the best investment options available to a long-term investor, first-time investors in equity and those who do not have a lump sum or the time to track their investments. The salaried class should also opt for SIPs since it developes a good savings habit and provides them with secured long-term investment planning.


CMT Level 1 Study Material

As a matter of fact you can watch live market trading that helps you to connect with CMT. Join a Technical Analysis Course which works on real time markets by using tools & techniques . That’ll give you behavioural understanding of real time Share market. Understanding the money management by real time trading or investment activity. As we know CMT is an MCQ Exam & ask question on application level. Create short notes of Course Content. Get PPT based Short Notes & note interpretation of tools & Techniques on technical analysis. Short Notes help you out to quick revision at the CMT exam time. CMT Books have very complicated language & course content is not properly aligned as it takes topics from various books of different writers. 

So we have to take individual topics and understand concepts in simple, Concise and Clear manner. Take content from various books or websites like Investopedia or Stock Charts on Each Topic for in-depth understanding. Apply tools & techniques with the help of Technical analysis or trading software’s. Read Books twice as MCQ can be created from a single line. while study mark important topics.