Can I invest in an ETF using a Systematic Investment Plan (SIP)?

by Manshu on December 9, 2009

in ETF

This question has popped up in comments and emails a few times now, and I think it is time to write a quick post on it.

Many Indian investors take advantage of Systematic Investment Plans (SIPs), — and regularly invest in mutual funds. This is –  good investing habit — because it lets you invest a portion of your income every month, and builds up your savings.

ETFs are like mutual funds in some ways, so it is natural for investors to wonder whether or not they can invest in them through SIPs.

Generally speaking, you can’t invest in ETFs by setting up SIPs. I say generally because I know that at least Kotak Securities has something called – Auto Invest, which is their attempt at creating something like a SIP for investing in ETFs. I am not sure how it works, so I will not be able to comment on it, but in general, — you can’t invest in ETFs – gold or otherwise, through SIPs.

Even though, there are no ready-made SIPs to invest in ETFs, replicating one should not be too difficult. You already want to invest regularly, so you have overcome the hardest hurdle already. The next question is where, and you obviously have that figured out too, so all that remains is the operational part of it.

If you trade with an offline broker, you can tell him or her to set up a reminder and they will be happy to call you every month that day, and make the trade for you. I’ve heard that Sharekhan has an option where they send you reminders and such, but I haven’t used that, so can’t really comment on it.

If you are online, then you could set up a reminder on Outlook, or Gmail or something else on your pay-day, and invest yourself. This shouldn’t take more 5 or 10 minutes of your time, and should work just as well as an SIP.

I’d be interested to hear your ideas on how this can be done more efficiently, or if there are any particular problems you face doing this.

{ 1 comment… read it below or add one }

Mubashir December 17, 2009 at 11:31 pm

I believe Value Averaging Investment (VIP) by Benchmark is much better investment option compared to the Systematic Investment Plan (SIP). Backtesting results have shown higher returns to the extent of 3.5% for VIP as compared to SIP.

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