What is power up SIP?
Power up SIP amount is the increased amount of SIP due to the opportunity of falling share price, fund NAV and portfolio value etc.
Due to the opportunity for price fall, Soved has created the Power up SIP calculator. The terms of which are Trailing return, FD/Median return or minimum return from where the calculation of Power up SIP amount will be started, Fall percentage for double SIP amount, Regular SIP/Fund amount.
Terms of Power up SIP calculator:
Here we will understand the terms of power up SIP calculator in detail-
Regular SIP/Fund amount:
If we are investing some amount like Rs.2000/- in any mutual fund, stock etc. in a systematic manner or at regular intervals like monthly, bi-monthly or quarterly then this amount is known as regular SIP amount.
If we are investing a lump sum amount once in a year or two years then the amount invested is known as fund amount.
Fall %age double SIP (>0%):
If we want our SIP amount to double if the market price falls by 20%. So then we have to take 20 in this input field. If we do not take anything in this input field then its value will be 100.
FD/Median return (+-%):
Whatever percentage we take in this input field, our fall percentage will be calculated by the same percentage.
Trailing return:
3month trailing return:
The return that will be calculate at the price of the day 3 months before, Today will be the 3 months trailing return.
6month trailing return:
The return that will be calculate at the price of the day 6 months before, Today will be the 6 months trailing return.
12month trailing return:
The return that will be calculate at the price of the day 12 months before, Today will be the 12 months trailing return.
After converting by calculator all three trailing returns into weighted trailing return, The lesser amount will be taken by calculator.
Here we will understand the calculation of Power up SIP amount through an example.
Example:
Mr. Abc investing Rs.5000/- every month in a mutual fund. Mr. Abc checked his mutual fund NAV before 1 day from SIP date and found 3 month trailing return is -20%, 6 month trailing return -10%, and 12 month trailing return is 6%. Mr. Abc wants to calculate power up SIP due to this opportunity and he wants, when fall side percentage reached 20% then power up SIP reached double. And also he wants power up SIP calculation to be start after falling more than -5%.
Solution:
Soved has created a logical and formal calculator for this Power Up SIP calculation, the formula and calculation of which is written below-
Power up SIP amount= Regular SIP amount-Regular SIP amount*100*min(0,0.25*(3month trailing return-median return),0.5*(6month trailing return-median return),1*(12month trailing return-median return))/(100*fall %age for double SIP amount)
By example,
Regular SIP amount= 5000/-
Median return= -5%
Fall %age for double SIP=20%
3 month trailing return= -20%, 6 month trailing return= -10%, 12 month trailing return= 6%
Power up SIP amount= 5000-5000*min(0,0.25*(-20-(-5)),0.5*(-10-(-5)),1*(6-(-5)))/20
Power up SIP amount= 5000-5000*min(0,-3.75,-2.5,11)/20
Power up SIP amount= 5000-5000*(-3.75)/20
Power up SIP amount= 5000+5000*3.75/20
Power up SIP amount= 5000+937.5
Power up SIP amount= 5937.5/-
Why should we use power up SIP amount, and how much higher returns will this strategy give?
Due to we get extra return over a period of investment time. When we use this power up SIP calculator for his investment during falling opportunity. But I am not sure to exact how much extra return we get. we get approximate 1%-5% extra return when we use this strategy for investment after fundamental analysis of fund, but this return depends various constraints and your investment risk profile like that time of investment period, fall percentage when invest, invested amount etc.