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In today’s fast-paced world, it is a challenge to juggle work, personal responsibilities, and financial planning. However, investing is crucial to secure a financially stable future and fulfil long-term goals. So, with the never-ending to-do list, how can you make time for disciplined and systematic investments? This is where Systematic Investment Plan (SIP) helps. SIPs help to automate your mutual fund investments, making investing hassle-free and convenient, even for the busiest of individuals.
The best part? With regular investments and market-linked returns, it is possible to create a corpus of a crore, which otherwise may have seemed unachievable. This means that even with small but consistent investments, it’s possible to make significant wealth and enjoy financial security.
Discussed below are the benefits of investing in SIPs to create a corpus of a crore and accomplish different financial goals.
- Regular investing
When you invest in SIP plans, you choose a fixed amount to invest every month, which is automatically deducted from your account. This takes the burden of manual investments away from you and ensures you maintain a regular investment schedule.
Regular investing helps you avoid making impulsive decisions based on market fluctuations, prevents you from missing out on investment opportunities, and encourages you to save money systematically. Moreover, since it eliminates the need for lump sum investments, you can plan your finances better without disrupting your budget.
- Rupee cost averaging
This investment technique in SIP ensures that you buy more units when the prices are low and fewer units when the prices are high, leading to a lower average cost per unit over time.
For example, if you invest Rs. 5,000 per month in a fund with an NAV of Rs. 50, you will buy around 100 units. But if the NAV drops to Rs. 40, you will buy about 125 units with the same investment amount. This way, you can leverage market volatility and earn higher returns on your investment.
- Flexibility
As an Systematic Investment Plan investor, you can choose the amount and frequency of your SIPs, making it easier to manage finances.
Moreover, step-up SIPs offer more control over your investments. By investing as little as Rs. 5,500 per month in SIP, with 12% annual return rate for 20 years, and stepping it up by just 10%, you can accumulate over Rs. 1 crore.
- Power of compounding in long term
By investing regularly for a long period, you have an opportunity to earn compounded returns. As the principal amount increases over time, the returns earned on it also increase, creating a snowball effect. The snowball effect of compounding is a key feature of long-term investing.
For example, by investing Rs. 10,000 per month in a mutual fund scheme for 20 years at a 12% annual rate of return, you can potentially accumulate a corpus of Rs. 1 crore upon maturity. If you only invested for 10 years under the same conditions, your investment would be worth around Rs. 23 lakhs, less than half of what it would be worth if you had invested for 20 years. This is the magic of the power of compounding.
To conclude
Investing in SIPs can be a smart and efficient way to build a corpus of a crore. The benefits of SIPs include low costs, diversification, disciplined investing, and potential higher returns over the long term through rupee cost averaging and power of compounding. SIPs can also be customised as per individual financial goals, budgets, and risk tolerance, making it accessible to investors from different backgrounds.
Moreover, the availability of different types of mutual funds for SIPs helps to create a well-diversified portfolio and makes the goal of a crore corpus more achievable.
