Some Features of Certificates of Deposit

Become A Disciplined Invester

Being disciplined – It’s the key to investing success. With the HDFC MF Systematic Investment Plan you commit an amount of your choice (minimum of Rs. 500 and in multiples of Rs. 100 thereof*) to be invested every month in one of our schemes. Think of each SIP payment as laying a brick. One by one, you’ll see them transform into a building. You’ll see your investments accrue month after month. It’s as simple as giving at least 6 postdated monthly cheques to us for a fixed amount in a scheme of your choice. It’s the perfect solution for irregular investors.

 *Minimum amounts may differ for each Scheme. Please refer to SIP Enrolment Form for details. 

Reach Your Financial Goal

Imagine you want to buy a car a year from now, but you don’t know where the down-payment will come from. HDFC MF SIP is a perfect tool for people who have a specific, future financial requirement. By investing an amount of your choice every month, you can plan for and meet financial goals, like funds for a child’s education, a marriage in the family or a comfortable postretirement life.

Take Advantage of Rupee Cost Averaging

Most investors want to buy stocks when the prices are low and sell them when prices are high. But timing the market is timeconsuming and risky. A more successful investment strategy is to adopt the method called Rupee Cost Averaging. To illustrate this we’ll compare investing the identical amounts through a SIP and in one lump sum.

Imagine Suresh invests Rs. 1000 every month in an equity mutual fund scheme starting in January. His friend, Rajesh, invests Rs. 12000 in one lump sum in the same scheme. The following table illustrate how their respective investments would have performed from Jan to Dec:

Suresh’s Investment Rajesh’s Investment
Month NAV Amount Units Amount Units
Jan-04 9.345 1000 107.0091 12000 1284.1091
Feb-04 9.399 1000 106.3943
Mar-04 8.123 1000 123.1072
Apr-04 8.750 1000 114.2857
May-04 8.012 1000 124.8128
Jun-04 8.925 1000 112.0448
Jul-04 9.102 1000 109.8660
Aug-04 8.310 1000 120.3369
Sep-04 7.568 1000 132.1353
Oct-04 6.462 1000 154.7509
Nov-04 6.931 1000 144.2793
Dec-04 7.600 1000 131.5789

As seen in the table, by investing through SIP, you end up buying more units when the price is low and fewer units when the price is high. However, over a period of time these market fluctuations are generally averaged. And the average cost of your investment is often reduced.

At the end of the 12 months, Suresh has more units than Rajesh, even though they invested the same amount. That’s because the average cost of Suresh’s units is much lower than that of Rajesh. Rajesh made only one investment and that too when the per-unit price was high.

Suresh’s average unit price = 12000/1480.6012 = Rs. 8.105
Rajesh’s average unit price = Rs. 9.345

Grow Your Investment With Compounded Benefits

It is far better to invest a small amount of money regularly, rather than save up to make one large investment. This is because while you are saving the lump sum, your savings may not earn much interest. With HDFC MF SIP, each amount you invest grows through compounding benefits as well. That is, the interest earned on your investment also earns interest. The following example illustrates this.

Imagine Neha is 20 years old when she starts working. Every month she saves and invests Rs. 5,000 till she is 25 years old. The total investment made by her over 5 years is Rs. 3 lakhs.Arjun also starts working when he is 20 years old. But he doesn’t invest monthly. He gets a large bonus of Rs. 3 lakhs at 25 and decides to invest the entire amount.

Both of them decide not to withdraw these investments till they turn 50. At 50, Neha’s Investments have grown to Rs. 46,68,273* whereas Arjun’s investments have grown to Rs. 36,17,084*. Neha’s small contributions to a SIP and her decision to start investing earlier than Arjun have made her wealthier by over Rs. 10 lakhs.

Do All This Effortlessly

Investing with HDFC MF SIP is easy. Simply give us post-dated cheques or opt for an Auto Debit from your bank account for an amount of your choice (minimum of Rs. 500 and in multiples of Rs. 100 thereof*) and we’ll invest the money every month in a fund of your choice. The plans are completely flexible. You can invest for a minimum of six months, or for as long as you want. You can also decide to invest quarterly and will need to invest for a minimum of two quarters.


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