A Systematic Investment Plan or SIP , is a facility offered by Mutual Fund companies that can help you take a step towards financial freedom. They allow you to invest calculated amounts at regular intervals in Mutual Funds, thereby helping you create a pool of wealth for yourself over a period of time.
SIPs automate your investments into mutual fund schemes periodically (every month / quarter) – as per your choice; helping you invest in a disciplined manner. You’re monthly investments can start from Rs. 500 for each installment, although it is recommended to invest a calculated amount, given your financial goals.Click here to calculate your Right SIP Amount.
Here’s why investing regularly in Mutual Funds through an SIP can set you on the path to financial freedom:
You gain investment discipline
Warren Buffet said this best, “Don't save what is left after spending; spend what is left after saving”. As your SIP installment is going to hit your account on a pre-defined date, it helps you develop a disciplined approach towards investing. For instance, to achieve a financial goal of Rs. 10,00,000 in 10 years at an expected Rate of Return of 12% p.a. compounded monthly, you would have to invest Rs 4176 per month.
You can benefit from Rupee Cost Averaging
Volatility is an inherent characteristic of stock markets, and while everyone would like to buy low and sell high, it’s difficult to predict the right time to invest. SIPs help you average out the cost of your investments, by allowing to consistently invest across different market levels. This also helps you take the emotions out of investing and stay focused on your long term financial goals.
Leverage the Power of Compounding
Compounding is nothing but growth upon growth, and by starting an SIP early you can take advantage of the power of compounding. Here’s an example of how it works:
Varun & Aditya started an SIP of Rs. 1000 per month into a Mutual Fund:
| Varun |
Aditya |
Monthly SIP: Rs 1000
Started at age: 30
Investment at age 50: Rs 2.4 lakh
|
Monthly SIP: Rs 1000
Started at age: 25
Investment at age 50: Rs 3 lakh
|
| Wealth Created at age 50: Rs 10.38 lakh
|
Wealth Created at age 50: Rs 19.96 lakh
|
| Assumed Annualized rate of return: 13%
|
Assumed Annualized rate of return: 13%
|
That’s the difference that the power of compounding can make in just 5 years.
So, take a step towards achieving financial freedom by starting an SIP in Mutual Funds today
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.