Systematic Investment Plan

#1
About DSP ML’s latest offering - Super S.I.P

IN a country with no social security or retirement benefits, individuals have to ensure that they save enough during their working life so that they are able to retire comfortably. Apart for one’s retirement, one needs to save for his/her child’s education and marriage, medical emergency or any other financial obligation that might occur.

Keeping in mind the fact that the value of money will go down over time due to inflation, we need to invest in an asset class that has been able to consistently outperform other asset classes and is able to give the highest returns post-inflation. If we compare the returns of different asset classes between 1980 and ’04, then on an average, inflation has been 6.7% and post-inflation gold has given a negative return of 1.1%. Bank FDs have delivered 3.55% and the BSE sensex has given 8.9% returns after deducting inflation. Clearly, equity is an asset class that has the ability to generate maximum wealth for investors. But it has been noticed that individual investors are apprehensive of the downside risk in equities, market volatility and market timing. In turn, it has been proved that if an investor invests for a long time, then timing the market becomes immaterial. If we scan the last 25 years and consider two scenarios, one where the investor makes a fixed investment at the highest sensex value every year and second where the investor makes a fixed investment at the lowest sensex value every year, then in the first scenario, the investor will get a return of 15.07% and in the second scenario a return of 16.90%. Since both the scenarios are highly improbable, if we assume that the investor made a fixed investment on the first day of every month for the last 25 years, then his returns would be 16.02%. Therefore, timing the market is not important. What is important is that we invest on a regular basis to benefit from the equity market and compound our money.

Keeping this in mind, DSP ML Mutual Fund has launched their Super S.I.P. Investors will be required to make systematic monthly investments in equity schemes of their choice. This is the first mutual fund product in the market that offers a term insurance cover. Super S.I.P. can be taken with any of the five existing schemes of DSP ML, namely, DSP ML Equity Fund, DSP ML Top 100 Equity Fund, DSPML Opportunities Fund, DSP ML India T.I.G.E.R. Fund and DSP ML Balanced Fund. DSP ML has bought a group life insurance cover from Bajaj Allianz Life Insurance Company and will provide a term cover to every investor who enters any of the above-mentioned five schemes through the Super S.I.P (S.S.I.P).

Super S.I.P. offers two options to the investor. First is the Variable Insurance Cover (Variable Plan) and second is the Fixed Insurance Cover (Fixed Plan). The variable plan can be taken for 6, 11 or 16 years and the fixed plan is available for 21 years. The term insurance cover will be the sum product of the monthly instalment amount and the number of months for which the instalment will be paid. Under the fixed plan, the term cover will be 240 times the monthly instalment amount. So, if an investor takes the fixed cover plan and decides to make a monthly instalment of Rs 1,000, then the term cover will be Rs 2,40,000 and this will remain fixed throughout. However, this is not the case under the variable plan. Here the term cover will be the sum of all SSIP instalments remaining, i.e. monthly instalment amount and number of months from the date of death until the end of the SSIP tenure. For example, if an investor opts for the 11-year variable cover and decides to invest Rs 1,000 every month, this means that the investor will pay the instalment for 132 months and therefore his term cover will be Rs 1,32,000. But this cover will keep reducing every month by Rs 1,000. Therefore, after two years when the investor has paid 24 instalments, the term cover will come down to Rs 1,08,000.

In the case of the investor’s death in the middle of the term/tenure, he will get the total value of his units as well as the insurance cover.The life insurance cover for the first 12 months is just Rs 1,000 and the life insurance cover for the sum assured starts from the 13th month onwards. Up to an insurance cover of Rs 20 lakh, no medical test is required. This means that under the fixed plan (21 years) up to a monthly instalment of Rs 8,333, no medical test will be required and under the variable plan (6 years), no medical test will be required up to a monthly instalment of Rs 33,333.

Coming to the schemes where S.S.I.P. can be used, they are DSP ML Equity Fund, DSP ML Opportunities Fund, DSP ML Top 100 Equity Fund, DSP ML India T.I.G.E.R. Fund and DSP ML Balanced Fund. Other than the DSP ML Top 100 Equity Fund, the other three equity funds have managed to outperform the category average in one-year returns. The oneyear returns from the four equity funds as on 1 September ’05, are DSP ML Equity fund 82.75%, DSP ML Opportunities Fund 66.01%, DSP ML T.I.G.E.R. Fund 67.31% and DSP ML Top 100 Equity 51.63%. The five-year returns are available only for DSP ML Equity fund 24.20% and DSP ML Opportunities Fund 27.84%, as the DSP ML T.I.G.E.R. Fund and the Top 100 Equity fund were launched in May ’04 and February ’03 respectively. The DSP ML Balanced Fund will invest minimum 30% and maximum 60% of its assets in equity and minimum 30% and maximum 40% in debt. This fund has given a one-year return of 37.49% against the category average of 42.50% and fiveyear return of 18.11% against the category average of 17.40%.

Investors are free to switch between these funds as many times as they want.

Investors will also have adequate liquidity under the S.S.I.P. Under the variable cover plan, any amount can be withdrawn anytime without any loss of insurance cover. But there is a 2% exit load if withdrawn within 2 years of each investment. There will be no charge on withdrawals after 2 years. Under the fixed cover plan, investors can withdraw the appreciation after 3 years and there will be a 2% exit load for withdrawal within the first 3 years.

This is ideal for investors who want to invest in the markets in a systematic manner for the long-term and are looking for a low-cost insurance cover. Since the cost of insurance is same across the board, investors in the higher age group tend to gain more as they will get an insurance cover at the same rate as someone much younger. So, the sooner one starts S.I.P. investments, the better.
Source: http://epaperdaily.timesofindia.com/Daily/skins/ET/navigator.asp?Skin=ET&AW=1125892291906
 
#4
SIP detailed comparison

Dear All,

Any pointers to detailed comparison between various SIPs. Basically on following points
  1. Rating
  2. Performance
  3. Recommendation [Must have, Should consider, Stay Away]

If some of the experts on the list has any idea, (even just the names) would be definitely helpful.

Thanks in advance,

Prasenjit
 
#5
Re: SIP detailed comparison

Actually the ratings/performance/recommendations are published for a given Scheme. An SIP into a good fund automatically works great for you over a period of time.

What do you mean by "detailed comparison between various SIPs"? Are you looking for certain good quality funds?
 
#6
Re: SIP detailed comparison

Thanks Sharath,

Well , you are right, the question need to be rephrased. "detailed comparison between various SIPs" doesn't make any sense. What I was looking for was comparision between various funds on the parameters mentioned(and I did find the same on http://www.valueresearchonline.com)

The other thing I wanted to know was I plan to invest in a MF using SIP option. Which fund should I go for. Is ELSS fund a good option considering it is also coupled with tax benifits (I am ok with lockin period of 3 years)
 
#7
Re: SIP detailed comparison

pbn78 said:
Thanks Sharath,

Well , you are right, the question need to be rephrased. "detailed comparison between various SIPs" doesn't make any sense. What I was looking for was comparision between various funds on the parameters mentioned(and I did find the same on http://www.valueresearchonline.com)

The other thing I wanted to know was I plan to invest in a MF using SIP option. Which fund should I go for. Is ELSS fund a good option considering it is also coupled with tax benifits (I am ok with lockin period of 3 years)
Yes, ELSS Funds are good option because one gets tax benefits while locking your investment for a longer horizon (the good way of going for equity/equity related investments). It might still be a better idea to opt for the dividend payout option in ELSS schemes - because, those periodic dividend payouts work as a steady profit booking mechanism in the 'compromised liquidity' (due to lock-in period) environment ELSS schemes operate in.
 
Last edited:

karthikmarar

Well-Known Member
#10
Re: Magic of SIP

Siva

Come on, he needs the email addresses, so that he can keep pestering people with the details of his wares. Be a sport :D
 

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