Life becomes easier for SIP investors

Besides making on-boarding easier, features like swing STP and top-up SIP aim to optimise the benefit

In the past couple of years, there seems to be a growing appetite among individual investors for Systematic Investment Plans (SIPs). As a result, their total number rose to 9.3 million in March, from 5.2 million in March 2014. The amount invested each month through these plans more than doubled from Rs 1,206 crore to Rs  2,747 crore over this period. Given this, fund houses are trying to make it easier for customers to get into these. They are also offering interesting tweaks to this feature.

Reliance Nippon Life Asset Management has launched an instant SIP registration facility. Says chief executive Sundeep Sikka: “It can take up to 21 days to register an SIP through physical application or Internet. When you submit a physical form, there is a chance of rejection if the signature or other key details don’t match. Internet registration also has a high drop-off rate, as investors are required to add the biller separately.” The instant registration facility seeks to avoid these issues. After logging into the website, investors have to choose the scheme and plan, investment amount, SIP date, etc. Then, they are directed to HDFC Bank’s net banking page, where they can log in and authorise the SIP registration instantly through debit of Rs 1. The fund house is in talks to expand this facility to customers of other banks.
 

Quantum Mutual Fund recently made the process of e-KYC and in-person verification (IPV) more convenient via the use of ‘selfies’. Earlier, you filled the e-KYC form online and then held a face-to-face session with the fund house’s customer service executive via a webcam to do the IPV. Now, instead of scheduling an appointment, you send in a selfie video to complete the IPV.



Systematic transfer plans (STPs), where money is transferred from a liquid fund and invested in an equity fund, have been tweaked by fund houses to take advantage of volatility and boost returns. In HDFC Mutual Fund’s Flex STP, when the net asset value (NAV) rises above the level at which you entered, the investor keeps investing the same amount. When it falls, he invests more, in proportion to the fall. The fund house’s Swing STP takes the idea a step further. You invest more when the NAV falls and invest less (based on a formula) when it rises.



A significant add-on is the top-up SIP. The premise here is that your savings and investment should grow in line with your salary. Says Nimesh Shah, managing director and chief executive officer, ICICI Prudential AMC: “By opting for this, the customer doesn’t have to start a new SIP or go through the formalities of changing the amount every time his salary goes up. The process of investing more is automated. It also allows him to reach his goals faster.” ICICI Prudential allows customers to increase the SIP amount by five or 10 per cent or by Rs 500 or Rs 1,000 every six months or annually.

An SIP is a suitable product, especially for the salaried class, as it matches their cash flows with investment. It introduces discipline and gives the benefit of rupee cost averaging. However, even an SIP can’t protect you entirely from the short-term volatility of equities. “When the markets fall steeply, don’t stop your SIP,” says Aditya Agarwal, founder, wealthy.in, a Bengaluru-based investment platform. For SIPs to work, he adds, investors should check fund performance and rebalance their portfolios regularly.