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Monday, February 18, 2019

Compounding is magic but, patience is the key

15 x 15 x 30

INR 15,000 SIP at an assumed CAGR of 15% for 30 years can give you return of INR 10 Crores upon maturity. 

Simply by increasing your tenure by 15 years one can get 10 times more return. The investment amount is INR 54 lakhs & the amount accumulated will be INR 10 Crores.

This is why compounding is so powerful. But do note that 15% CAGR means 15% average return over a period of time and not 15% annual return.  

One can experience a 20% return one year and -20% the next year. The average will be 15% over the period of time. Equity funds have beaten inflation and all the other asset classes in the long term (10 – 15+ years).

                                                                                Benefits of SIP Investment
 
 Rupee-Cost Averaging

When a fixed amount is invested regularly over a period of time through different market cycles, one can get more units when the price is low and fewer units when the price is high. This reduces the average cost of investment in the long run.

Levels out market fluctuations

Since mutual funds units are being bought regularly by way of SIP, short-term market fluctuations are leveled out. Also, one has to ensure they are not investing in a SIP way too regularly. For example, weekly or fortnightly. If one has a weekly or fortnightly systematic investment plan, they will look at their investments too often. The short-term ups and downs might affect their investment decisions, which can be avoided by a monthly systematic investment plan.

Disciplined Investing

By investing a fixed amount out of regular savings, one is forcing themselves to get used to a fixed investment pattern. This will help them build a corpus for their long-term financial needs. Money not invested often gets spent on consumption and compromises the long-term goals of the investors.

Simple and easy to monitor

With a regular monthly investment, tracking of investments becomes easy and convenient. Also, SIP investment has become much simpler just at the click of a button.

Flexibility

A SIP can be stopped any time at one’s convenience. The SIP can be paused, or the SIP amount can be increased or decreased at any time during the SIP’s tenure.

Long-term gains

SIP gives return only over a period of long-term. Its important one sticks to an investment for at least a period of 10 years for higher returns. Patience is the key to success. Stay invested for long to earn higher returns. Focus beyond returns or performance & focus up on Goal Achievement.

“Compound interest is the 8th wonder of the world. He who understands it earns it and he who doesn’t pays it.” – Albert Einstein 

The value of the investment keeps growing at a geometric rate (always increasing) than at an arithmetic rate (straight-line). Your money keeps on multiplying over a period of time.

Be Smart, Be Wise & Act Now as its in your own interest. Instead of opting for Direct Plans focus on Regular Plans & look in for ethical, honest, unbiased professional.

Choice is yours, as money is yours. But, remember wealth & health both require professionals. 

 Warm Regards,                             
      Varun Vaid                                               
           
 +91-9814612907
 +91-0172-4623907

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