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Moneylife » Personal Finance » New Products » Now, you can invest in a Systematic Investment Plan for your shares

Now, you can invest in a Systematic Investment Plan for your shares

N Madhavan | 29/07/2011 04:54 PM | 

After mutual funds, brokerages have introduced SIP for shares. This can be an attractive investment option—Reliance Securities and Geojit BNP Paribas have launched Systematic Investment Plans for equity holdings

Banks offer recurring deposits, and subsequently, mutual funds introduced Systematic Investment Plans (SIPs). Now stock brokers have introduced systematic investment in shares. It is an attractive model of investment, based on the dollar cost averaging (DCA) or constant share purchase model evolved many years ago in the US. Reliance Securities and Geojit BNP Paribas have announced SIP for shares.

The investor has to select a share in the market and invest a fixed sum of money in its purchase every month/quarter—say, Rs5,000. (The number of shares actually bought would be rounded off to the lower limit to avoid fractional shares).

When a share's price is going up, rupee cost averaging would mean buying fewer shares and when the price is down, the reverse will be true. The investor would accumulate a large number of shares over the years. The portfolio value would thus grow along with the market value of the share. This would be useful for saving for the marriage or higher education of a child.

This is more scientific than timing the market on when to buy, or lump sum investment of bank/salary savings—without knowing whether the market is likely to fall. It can act as a good hedge against price volatility as this technique of investment averages the cost of purchase of any chosen stock or basket of stocks over the duration of the SIP.

CJ George, managing director, Geojit BNP Paribas said in a release, "Investors with a regular monthly income can use this route for investing their monthly savings in stocks of their choice or a basket of stocks. Since this is a facility that Geojit BNP Paribas provides on the Internet, it is easy for investors to plan their savings and investments."

Reliance Securities has its own SIP scheme known as 'Regular Stock Purchase Plan' or RSP Plan, which is a disciplined and easy way to invest in the equity market by making small, regular investments. The investments are in a prefixed amount or quantity of shares at defined intervals in scrips of your choice for a fixed tenure. This is a systematic approach to build wealth over the years and the discipline relieves the investor of the risks and pressures of timing the market.

Reliance Securities has an alternative to the SIP/Rupee Cost Averaging option, the quantity-based RSP Plan. This is an RSP Plan type wherein a constant quantity of shares of a desired stock is purchased at each frequency. The quantity would be as specified by the investor and would be fixed, while orders would be placed as per the desired frequency. The order value would be based on the market price of the stock prevailing in the market at the time of order placement. The investor can place an RSP Plan request for a minimum quantity of a single share. This Plan is based on the constant share purchase model (CS-model), which has some popularity in the USA. It is useful for accumulating sizeable number of shares over the years in good scrips.  

With the above options, an investor's portfolio will grow both in quantity of shares held and market price value over time-provided the scrip is chosen carefully and we don't fall into a prolonged bear market.

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Ashok 4 years ago

Equity SIP into an ETF would be a great option. You can get the advantage of diversification, the low cost of ETFs and the RCA benefits of SIP. Best of both worlds !!

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Mutual Funds

Mutual Funds 4 years ago

As far as systemic Investment Plan is concerned it is the best way to make your portfolio. But whereas in shares you can buy in every dip and buy more in the next dip with a vision of minimum 5yrs. It is only then your ral investment return is highlighted.

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Mutual Funds

Mutual Funds 4 years ago

I think SIP is the best way to invest in the unpredictable Indian stock market, but Mutual funds are more convenient and risk fee way for it. We should leave it up to the professionals how and when to invest.

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Shuvendu Nath

Shuvendu Nath 4 years ago

Equity SIP is already active with ICICI Direct. However EQ SIP strategy is working to be a good options for small investors like me. It is prefered to be a rewarding investment option in long term plan. Great facilitation.

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