Do you know that you can grow wealth even if you are not earning a fat paycheck? While everyone wants to have a high salary package or profits, not everyone has the same kind of luxury. That does not mean that only a select few can be rich and wealthy. Gone are the medieval days, when only those who inherited huge sums of money or had big businesses would remain rich.
Nowadays, even Janitor can become wealthy. Sounds crazy, right? Well, it’s not mainly because of the new age financial instruments, which can transform the fortunes of anyone. Though out of a vast sea of financial tools and instruments available, there’s a special & simple tool, which can make anyone financially sound.
That tool is SIP(Systematic Investment Plan), which is offered by mutual funds to investors for making investments in a systematic and disciplined manner.
What exactly is SIP and how can it aid you in growing your wealth? Let’s see-
SIP is an investment tool, which allows you to invest a fixed amount of money in intervals as per your preference in various Mutual Fund Schemes. These intervals which you select can be weekly/monthly/quarterly/semi-annually or annually. A great thing about investing your money via SIP is that you can start investing with as low as Rs 500 available in your pocket.
There are a couple of advantages for investing in a SIP but the one which warrants investment in it is, Compounding. Like a cheat code in a game, Compounding works in accelerating your return on investments. However, there is a caveat. To avail the benefit of compounding, one has to remain invested for a long-time and has to keep patience. After all, a SIP is a legitimate investment tool, not a Ponzi scheme.
In a SIP, compounding works by reinvesting the gains earned on your principal amount, which ensures that you earn not only on your principal amount but on the gains too, thereby accumulating massive gains in the future. Take the following example for this-
Suppose there are two individuals, let’s call them Nivesh and Arunesh respectively. Nivesh starts investing Rs 1000 when he is 25 years old, while Arunesh only starts after becoming 35 years old. If we assume a rate of return of 12% compounded annually for both, by the time they reach 50 then, Nivesh would have earned a whopping Rs 18.97 lakhs while Arunesh only Rs 5 lakhs.
This stark difference between their earnings is due to the power of compounding, and which also points to an important fact, that one must begin investing from an early age, to gain massive benefits.
A magical tool indeed. Since SIPs is an investment tool available in mutual funds, other benefits it bring can be summed up as-
- SIPs can be started with a very low amount and only demands discipline from you; therefore it is an easier and simple way of creating wealth in the long run. When you invest in SIPs, naturally you’ll get to experience the highs and lows of the stock market too. Though, you don’t have to be worried about observing the market all the time as your returns will average out in the long run due to SIPs Rupee Cost Averaging feature. Coupled with the power of compounding and the diverse assets in which Mutual Funds invest such as Stocks and Bonds, you get diversification and high returns on your investment.
Wealth creation is not an easy game but to attain it, investing via SIP is the most simplified way. You either make your money work for you by choosing SIP or make yourself work by your money by choosing not to invest in Mutual Fund via SIP.Either way, it’s your decision to make.