How Can SIP Help You Become Wealthier?
By Urvashi Arya
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SIP stands for a Systematic Investment Plan, and it is a method of Investing in Mutual Funds. It allows you to regularly Invest pre-determined sums of money in a Mutual Fund plan. SIP allows you to Invest in Mutual Funds in a systematic and timed manner.
The systematic Investment plan allows you to contribute as little as Rs 500 for every payment. You can choose from the options of a period of daily, weekly, or monthly schedule SIP. Investing your hard-earned funds in Mutual Funds through systematic Investment plans (SIPs) is beneficial in bull and bear markets.
Why should you Invest in a SIP?
The advantage of averaging rupee costs
If you Invest in equity funds through a systematic Investment plan (SIP), you benefit from rupee cost averaging, which allows you to avoid market timing. It's a strategy in which you regularly Invest tiny quantities of money in a Mutual Fund plan.
When stock markets fall, it allows you to acquire more Mutual Fund units, and when markets rise, it allows you to buy fewer Mutual Fund units. Over time, the cost of your Investment will be amortized.
SIP encourages Investors to be more disciplined with their money.
SIP pushes you to save money before spending it. It instills discipline in you through the Investment process and assists you in achieving your long-term financial objectives.
If you have a fixed monthly paycheck, you can choose SIP dates close to payday for your monthly SIP. It assures you that you have enough money in your bank account to complete SIP transactions. Furthermore, the AMC will cancel your SIP if you miss three consecutive SIP payments.
The potential of compounding is yours with SIP.
You may want to give strong thought to Investing in stock funds through a systematic Investment plan (SIP) at a young age. It allows you to profit from the power of compounding as your Investment grows over time. Compounding is defined as the reInvestment of earnings to generate a return on Investment.
To maximize the return from equity funds through SIP over time, you must have a long Investment horizon. To build a larger corpus, you must Invest in long-term financial goals such as retirement at a young age.
You must choose an Investment that can provide you with inflation-beating returns over a long period. Over time, you could Invest in equity funds using a systematic Investment plan (SIP) to maximize your return through compounding.
How can SIP help you become wealthy?
In the long run, you can Invest in equity funds through a systematic Investment plan (SIP). It liberalizes you to regularly Invest small amounts of money in Mutual Funds without time in the market. However, you should stick with SIPs during both bear and bull market periods to build wealth. Let's look at an example of how SIP might help you get wealthy.
Assume you Invest Rs 10,000 per month in an equities fund using a systematic Investment plan (SIP). You make Investments for 15, 20, 25, and 30 years.
If you Invest Rs 10,000 per month in an equities fund under a systematic Investment plan (SIP) for 30 years, you will have amassed a corpus of Rs 3.53 crore. Compounding enhances your wealth and makes you wealthy. However, you must begin Investing early to Invest throughout your working life and retire with a sizable nest egg.
Please keep in mind that we've projected a 12-percent average return from the equity fund. Actual returns fluctuate based on market conditions and the fund.
Urvashi Arya
Urvashi Arya - Content Writer - Vantage ITeS Consulting | LinkedIn
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How Can SIP Help You Become Wealthier?
By Urvashi Arya
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