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
