A smarter SIP option

Ashok Kanawala

VP Products & Business Development


SIPs inculcate a disciplined investing approach. However human nature often tries to maximize the opportunity by attempting to buy low and sell high, which is almost impossible to achieve consistently. That’s where Flex SIP comes in – by bringing the best of both worlds – disciplined investing coupled with a logical way to buy more at lower levels.

Most investors make mistakes, but some investors tend to compound them. In pursuit of higher returns, investors often try to time the market, only to be disappointed by the reality of unexpected turns in performance, thus falling prey to market volatility. Hence, investing systematically at pre-determined intervals can help you deal with market volatility and overcome your behavioral biases. Further, it has been observed that investing at lower levels tends to create substantial wealth over the long term. So, how about getting the best of both worlds i.e. investing systematically and investing higher amounts at lower levels?

Introducing Flex SIP – HDFC Flex SIP is a SIP facility wherein the periodic instalments may be higher as the market moves lower. HDFC Flex SIP, along with inculcating the habit of disciplined investing also ensures that higher amount is invested when markets are down, which generally results in higher wealth as compared to Normal SIP at the end of the SIP tenure*.

At the beginning of HDFC Flex SIP, the investor needs to decide the amount per instalment and the tenure of HDFC Flex SIP. There will be 5 Flex SIP tenures to choose from:

  • 3 years (36 instalments in case of a monthly SIP and 12 instalments in case of a quarterly SIP)
  • 5 years
  • 10 years
  • 15 years
  • 20 years

SIP - Systematic Investment Plan

*HDFC Flex SIP in any manner whatsoever is not an assurance or promise or guarantee on part of HDFC Mutual Fund/HDFC Asset Management Company Limited to the Unit holders in terms of returns or capital appreciation or minimization of loss of capital or otherwise.

The first Flex SIP instalment will be processed for the fixed amount specified by the Unitholder in the enrolment form. The instalment amount mentioned shall not exceed Rs. 1 Lakh. From the second instalment onwards, the investment amount shall be computed as per the formula. The formula ensures that higher amount is invested when markets go down and a fixed amount is invested when markets move higher. To better understand Flex SIP in contrast with Normal SIP, the below thumb rule may prove useful. Assuming, an investor chooses to initiate monthly installments of Rs. 5,000 under Normal SIP and Flex SIP, the trend of subsequent monthly installments could be determined as below:

Features of HDFC Flex SIP

This facility is only available under GROWTH option of open-ended equity schemes and open-ended balanced schemes of HDFC Mutual Fund.

The first Flex SIP instalment will be processed for the fixed instalment amount specified by the Unit-holder in the enrolment form.

From the second Flex SIP instalment onwards, the SIP amount shall be computed as per below formula

The total amount invested during the tenure of Flex SIP shall not exceed the total enrolment amount i.e. amount of 1st instalment X total number of instalments.

The first instalment amount will be maximum of Rs 1 lakh.

The instalment amount during the subsequent months will be maximum twice the initial instalment amount (subject to a maximum of Rs 1,99,999).

Back tested result of Flex SIP

Below table shows results of Rs 5000 per month invested at the beginning of the month in the 5-year time frame under Flex SIP and Normal SIP over the last 22 years.

CAGR return of 0% to 7% has been classified as Range bound.
Underlying for the above back testing is NIFTY 50 INDEX.
Value accumulated is as on the last date of respective calendar year.
It has been observed that wealth created would be higher under Flex SIP as compared to Normal SIP in 100% observations.


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