Systematic Investment Plan or SIP as it is commonly known, is one of the most proficient and powerful tools to build wealth through mutual funds.
Most of us are aware of systematic investment plans offered by mutual funds that allow you to invest a fixed amount regularly in a scheme; top it up; and continue it for a long period of time. But what many of us wrongly construe is that a systematic investment plan is meant for meagre amounts, which is only half the story.
A Systematic Investment Plan is essentially a wealth building tool. By ‘wealth building’, we mean an investment option that, if you invest regularly in it, could help you build a sizeable corpus in the long term. This stands true whether you invest Rs. 1,000, Rs. 10,000 or Rs. 1 lakh regularly over the long term.
The power of compounding:
Compounding works as a multiplier over the long term – whether you invest Rs. 1,000 or Rs. 50,000. Over a period of time, your investment will earn interest and the interest will earn additional interest. And obviously, more the investment, higher will be the interest.
The flexibility to top-up:
If you cannot afford to start with a big amount, start small and keep adding to your SIP with time. Quite naturally, your income would increase with time and you could subsequently keep increasing your SIP amount, thereby boosting the growth.
To fulfil specific goals:
Ideally, a SIP should be targeted towards fulfilling a specific goal. Goals could vary from small ones such as buying a car to bigger life goals such as funding your children’s education. Here is where your SIP amount can differ accordingly -for smaller goals such as buying a car, you could start a SIP with relatively a smaller amount and for goals such as your children’s education, your SIP amount could be relatively higher. Either way,it will compound with time.
The above mentioned reasons coupled with other benefits of a SIP make it one of the ideal tool to build wealth. So, whatever be your goal, treat a SIP as one of the tools to help you fulfil in a disciplined, regular and smart way!
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