Systematic Equity Plan (SEP) in stocks / SIP in stocks
Investments in equity have always given good returns over a long term. However, due to stock market volatility, many of us would be afraid of direct investment in stocks even though there are best stocks to buy for long term investment. One of the answers to this is Systematic Equity plan in stocks. It is also termed as SIP in stocks. In this article, we would discuss in detail about Systematic Equity plan / SIP in stocks.
We all aware what is SIP in mutual funds
We all know the Systematic Investment plan in mutual funds. We can invest fixed amount in mutual funds through SIP every month. Based on the NAV of the mutual fund, the units for the fixed amount are allotted every month.
But, what is Systematic Equity Plan (SEP) in stocks / SIP in stocks?
Systematic Equity plan (SEP) in stocks, works similar to SIP in mutual funds. Under Systematic equity plan, you can either buy the shares within a fixed amount or you can buy a fixed quantity every month.
How does it work?
Almost all brokers are offering such SEP service now. You can directly create a SEP plan in your account for any stock. All major stocks are available for SEP plan.
E.g. we can opt for SEP for ₹ 5,000 to invest in Bharti Airtel. If we consider approx price as ₹ 300 per share, we can buy (₹ 5,000 / 300 per share) 16 shares approx which costs to ₹ 4,800 which is within the fixed amount indicated. However we can also opt to directly buy 16 shares every month irrespective of the price. The amount which you need to pay would depend on the price on which the transaction would get executed which may be within ₹ 5,000 or beyond ₹ 5,000
Below is sample example how the investments are made through this plan.
Step-by-step on how to create Systematic Equity Plan in stocks / SIP in stocks
Login to your brokerage account
Create SEP for any selected stock
You can select a fixed amount or fixed quantity
Select the date on which the SEP should be executed
You can create multiple SEP for stocks in your account.
On the specific date, ensure that required amount is available in the bank account to execute such SEP transaction.
The shares would be credited to your account by T+2 days like a normal share purchase transaction.
Lump Sum investment in stocks Vs Systematic Equity Plan in stocks
Below are the variances between these two methods.
In general scenario, you would purchase the stock as on that date with lump sum amount. Whereas, in SEP method you purchase the same stock every month on a fixed date within fixed amount or fixed quantity.
Under lump sum amount, you buy the shares at a price which might be high or low. Investors need to face subsequent market volatility. However under SEP method, the cost gets averaged out since you purchase them every month over a period of time, hence any increase or decrease in stock price would get averaged out.
Lump sum investment in stocks would work well during bear market where the stocks are available at cheap or attractive prices. Investment done in such scenario would provide excellent returns over a long run. SEP method would work well in all scenarios, however the returns are limited comparing to lump sum investment done in bear market or lump sum investment done when markets are at low.
Systematic Equity Plan is best suitable for?
While investments done in bear market always provide best returns, we cannot wait for bull market to come very often. This method is best suitable for investors who are afraid of stock market investments due to volatility, but want to gain by investing in stocks for long term. This works as a best weapon to invest any time either in bull market or bear market.
Readers, I invite your valuable suggestions and feedback on this article so that we can improve the future articles.
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Suresh
Systematic Equity Plan (SEP) in stocks / SIP in stocks
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dear sir,
many thanks for your valuable research and advice. now could you pl. recommend a model sep plan for invested amt. of rs. 5000/- only p.m.?
moreover, i need a nice article from you on F&O trading.
looking for your early reply.
Can you suggest the best broker providing amount based equity sip?
In SEP if I invest Rs. 1000/- every month in ICICI BANK. AT PRESENT RATE WILL THIS SHARE BE PURCHASED IN FRACTION OR IN ROUND QTY.
Satish, it would be round of qty
Hi Suresh, Thanks for the article. Please help me with following questions:
Why shouldn’t I go with a recurring deposit instead?
Which one would have better returns in an ideal scenario if I buy a blue chip fund for SIP say SBI and same stock in SEP (viz. SBI)
I would advise to avoid recurring deposit or fuxed deposit of banks because of low rate of interest. Instead do some home wirk an invest in equity funds. You can go through the websites giving rating of various mutual funds and can select the funds for investment. There are chances that good mutual funds will give little higher returns then recurring deposit of bank.
i am beginner. I want to learn sip. i have account with sbi and axis bank as a saving account.
Can I do it from existing account.
Hi Suresh, Which are the good funds to invest in SEP and SIP for Longterm 3-5 years
State Bank or ITC or HDFC or ICICI Bank, These stocks are low risk.
tell me about hudco and tatapower
What will be the average rate of return of SEP’s as compared to SIP’s in mutual funds
Nice Article , Thanks much Suresh !!!
What is necessary for sep by demate account or other meathod
You should open demat account with ICICI direct or any other broker who is offering this SEP service
thank u nice article…
thank u, nice article..
Hi Suresh,
Nice article. We can start SIP with minimum Rs. 500/-. What’s the minimum amount required for SEP?
Vikas, it depends on share value. If a share price is Rs 100, you can invest to this value or any number in multiples of this.
WHETHER SIP OR SEP BETTER OPTION IN LONGTERM INVESTMENT SAY 25 YEARS?
Srinivas, SIP is mutual funds and SEP is for stocks. Both are good options for long term provided your are discipline in your investments. But I would prefer to invest in stocks at every dip or crash in stock market.
Hi suresh
I have no words to thank u.
Is this SEP of fixed quantity(say 1 gram/unit) is applicable for SBI gold ETF??
Yes Priyajit, This is how I do investment in SBI Gold ETF thru SEP.
Dear Suresh,
Nice article again. Could you elaborate SEP and Direct Lumsum by providing actual figures for certain period for stocks like ITC,Hindalco,HDFC Bank etc?
This topic is very important and lot of comments should come from readers.
regards
amol
Sure Amol. I would publish an article as extn to this in next 1-2 weeks.
Hi suresh,
Nice article. I came to know about SEP only through this article. i think its an excellent way of building wealth…regards
Dear Suresh,
Good article. It would be better, if you provide some good stocks for SEP in 2013.
Thanks
Ravi
Dear Ravikumar,
I think stocks which are volatile in nature such as JP associate are good for SEP.
amol