Systematic Investment Plan, more commonly known as SIP, is gaining popularity in Nepal over the last few years. Systematic Investment plan(SIP) in Nepal can help your grow your savings much more than a regular savings account using the power of compounding. So let’s go over in details about Systematic Investment Plan in Nepal.
What is Systematic Investment Plan(SIP)?
A Systematic Investment Plan (SIP), more commonly known as SIP, is a facility offered by various capitals or mutual funds to the investors. SIP in a route to investment, that helps it users to invest in a timely and disciplined manner. Using SIP facility, an investor can invest a fixed amount of money at pre-defined intervals in the mutual fund scheme of their choice. Generally, the fixed amount of timely deposits can be as low as 1000 NRs.
Systematic Investment Plans in Nepal offer intervals that can be on a weekly/monthly/quarterly/semi-annually or annual basis. SIP is beneficial to investors as they invest in a time-bound manner without worrying about the market situation. They benefit much more in the long term due to dollar cost averaging and the power of compounding. Due to the growing popularity of SIP in Nepal, many mutual funds and capitals are offering these facilities there days.
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Systematic Investment Plan(SIP) in Nepal
Now a days many capitals provide the facility to subscribe or use SIP to invest. To get registered with a SIP facility, you need to visit the capital that provides this facility and fill the SIP registration fund.
Using the SIP facility, you can choose to invest in just one mutual fund in the pre-set interval, or you can choose to invest in a broad range of stocks depending on whether or not the capital or financial organization provides this or not.
For example, to register with the SIP facility for mutual fund “NIBL Sahabhagita Fund”, you need to visit NIBL Capital and fill the SIP registration form. Or you can choose Global IME Capital’s ‘GICL Systematic Portfolio (SIP)‘ to invest in a range of stocks.
Capitals providing SIP Facility in Nepal
Many facilities now provide SIP facility in Nepal. Some of the most prominent ones are:
You can visit them, or call them to understand more about their SIP plans or SIP registration details.
SIP Dividend Reinvestment [DRIP] Options
For your SIP investment in Nepal, it’s common to receive dividends on an annual basis. In your SIP, you can choose what you do with those dividends. You can choose to cash out, i.e. deposit that amount in your bank account and use it as your like. You can also choose to reinvest that amount for greater gains. There are two ways you can reinvent your dividends:
- Growth Option: In this option, your don’t take out dividends from your investment, you keep them in mutual fund. Since you’ve not taken out cash from the fund, this ultimately increases NAV, and you get greater capital gain at maturity, or when you decide to sell the shares. In this option the number of shares you hold does not increase, but the shares that you hold increase in value.
- Dividend Reinvestment Option: In this option, you take dividends but allow the fund manager to purchase more shares in the fund. In this option also the cash is not paid out to you, but it is used to buy more shares in the fund, and it is then transferred to your account. In this option, the number of shares that you hold increases. Typically this grows your account value too. You can realize capital gain on those shares by selling the shares.
Note: Whether you choose dividend reinvestment plan or growth option, you are choosing to not cash out any dividend and use the dividend to grow your portfolio even more. While this is a good strategy to grow your portfolio value quicker, keep in mind that there won’t be any cashflow, and if you need cashflow, you might just want to cash out the dividends.
Benefits of SIP in Nepal
- Disciplined investment: Instead of investing large amounts occasionally, SIP helps you achieve better results by investing smaller sums regularly.
- Averaging Investment Cost: SIP facility enabled you to buy more units when the NAVs are at low and fewer units when the NAVs are at high. This results in averaging of cost per unit at long period of time and grow your portfolio.
- Avoid sentiment driven investment: By making you invest the same amount every month (or every quarter), SIP helps you avoid the typical sentimental mistakes of the market. People usually invest larger sums in bull market (when the market are at a high) and smaller sums in bear market (when the market are at a low), SIP helps you avoid that.
- Convenience: Many SIP facility provides the option of directly debiting your bank account for payments made towards the fund. So you don’t need to visit the capital’s or fund’s office every time. All you need to do is give instructions via call, or fill the details during registration. The fund manager will handle SIP investments for you and you will automatically get your investment in your DEMAT accounts.
Common SIP Queries in Nepal
Let’s go over some major concerns and queries about systematic investment plan in Nepal:
SIP requests for sell transaction
You cannot place SIP requests for ‘SELL’ transactions. You can only place SIP Requests for “buy” orders under most of the SIP facilities.
Can I cancel SIP facility
It basically depends on your capital, but for most cases, the fund should allow you to cancel the SIP investment prior to 7 days of the next SIP investment. Once you cancel, all your future buy orders will be cancelled and you’ll be able to sell your existing shares.
How is SIP calculated
You can place buy orders for a pre-specified amount of your choice at the NAV of SIP date
hence, the units of the scheme will be calculated on your SIP dates.
Method of SIP units Calculation: SIP Unit = (SIP Amount – Application Charges)/Applicable NAV
Conclusion – SIP in Nepal
As we’ve seen, SIP helps with a lot of things and keeps you investing some pre-defined amount every month. This can help you to grow your wealth a lot within just a few years of time.
In case you have any queries regarding SIP investment in Nepal, I’ll help you out to the best of my abilities.
Additional: In case you choose to take the other route and invest on your own, you can learn how to start in secondary market here: Start Trading in NEPSE or How To Use TMS
I want to know, in an open ended mutual fund, if dividend is distributed in 2079 chaitra end and i purchase 100 unit of mutual fund, will i get full dividend? and i saw that when in sip the DP charge is Rs. 25 but directly buying the unit the DP charge is rs. 5. What is the difference between purchasing units and doing SIP?