A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The fund's Net Asset Value (NAV) is determined each day.

Mutual Funds are financial intermediaries. They are companies set up to receive your money, and then having received it, make investments with the money Via an AMC. It is an ideal tool for people who want to invest but don't want to be bothered with deciphering the numbers and deciding whether the stock is a good buy or not. A mutual fund manager proceeds to buy a number of stocks from various markets and industries. Depending on the amount you invest, you own part of the overall fund.

The beauty of mutual funds is that anyone with an investible surplus of a few hundred rupees can invest and reap returns as high as those provided by the equity markets or have a steady and comparatively secure investment as offered by debt instruments.

Net Asset Value (NAV) is the actual value of one unit of a given scheme on any given business day. The NAV reflects the liquidation value of the fund's investments on that particular day after accounting for all expenses. It is calculated by deducting all liabilities (except unit capital) of the fund from the realisable value of all assets and dividing it by number of units outstanding.

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Just as drops of water make an ocean, small but regular investments can go a long way in building wealth over time. This way you grow step by step. It's always prudent to invest with a long term horizon in mind. Small but regular investments go a long way in creating wealth over time. Reliance Systematic Investment Plan (SIP) helps you achieve just that. It is an investment technique where you deposit as little as Rs. 100 regularly every month into the mutual fund scheme at the then prevailing NAV (Net Asset Value), subject to applicable load.

No need to time the markets Imagine, if you could always pick the right time to buy and sell. However, timing the market is a time-consuming and risky task. Through disciplined, regular investments you can stop worrying about when and how much to invest. In short, it eliminates the need to actively track the markets.

Lower cost per unit Since your investments are spread regularly over a period of time, buying fewer units during rising markets and buying more units during falling markets reduces the average cost per unit of your investments - this concept is known as Rupee Cost Averaging.

Illustration - Rupee Cost Averaging Say you have opted for Systematic Investment Plan, investing Rs. 1000 every month from March 2009 to Feb 2010 in a diversified equity fund. Now check the average purchase cost per unit of your investments. It would be lower than the average NAV of your investment over 12 months.

 
Date NAV (Rs.) Units Amount (Rs.)
2/03/09 190.47 5.25 1000.00
13/04/09 233.32 4.29 1000.00
11/05/09 252.50 3.96 1000.00
10/06/09 339.27 2.95 1000.00
10/07/09 307.21 3.26 1000.00
10/08/09 343.02 2.92 1000.00
10/09/09 375.56 2.66 1000.00
12/10/09 392.46 2.55 1000.00
10/11/09 392.76 2.55 1000.00
10/12/09 416.48 2.40 1000.00
11/01/10 439.79 2.27 1000.00
10/02/10 412.21 2.43 1000.00
Total 4095.04 37.47 12000.00

 

Average Cost = Total Cash Outflow / Total Number of units = Rs. 12000/ 37.47 = Rs. 320.24 Average Price = sum of all NAVs at which you have invested/Number of months of investment = Rs. 4095.04/12 = Rs. 341.25 Average Cost < Average Price

Note: The above table considers the actual NAV of Reliance Growth Fund to explain the concept of Rupee Cost Averaging. The NAV do not in any manner indicate the future NAVs of the any of the schemes of Reliance Mutual Fund

Past performance may or may not be sustained in future.

Achieve your financial goals

Reliance Systematic Investment Plan is an effective tool for financial planning. Be it your child’s education, marriage or buying a home. With Reliance SIP, you can choose a pertinent regime and achieve your goals, systematically. To see how you can achieve your goals see the Reliance Vision Fund and Reliance Growth Fund table along side.