Systematic Investment Plans (SIPs) allow you to invest a fixed amount at regular monthly periods rather than a lump sum at once. The SIP investment plan is popular in India because it helps investors to save and invest in a disciplined way.
The number of factors determines whether SIPs will make you rich, including your investment amount, the duration of the investment, and the performance of the mutual fund. It is possible to build wealth through SIPs over the long term, particularly if the fund you invested in performs well over the long term.
Systematic Investment Plans (SIPs) allow you to invest a fixed amount at regular monthly periods rather than a lump sum at once. The SIP investment plan is popular in India because it helps investors to save and invest in a disciplined way.
SIPs, as well as other types of investments, do not guarantee a return. Choosing a mutual fund investment plan from Bajaj Finserv aligns with your investment goals, and risk tolerance requires doing your own research, understanding the risks, and knowing the risks involved. In addition, a well-diversified portfolio ensures that risk is minimised and returns are maximised.
The SIP can be an effective tool for building wealth over the long term, but it does not guarantee success. A long-term perspective and patience are required when investing through a SIP. Here is an example of how SIP works.
Take the example of an investment in a mutual fund with an average annual return of 12%. SIP begins with a monthly investment of Rs. 5,000. A total investment of Rs. 6,00,000 would be made after ten years (5,001 x 12 x 10). With an average return of 12%, your investment would grow to approximately Rs. 14,76,000 (6,00,000 x 1.12^10).
Investing Rs. 5,000 per month over 10 years has resulted in a corpus of Rs. 14,76,000, which is a substantial amount of money. SIPs are an excellent way to invest because of their compounding power and the benefits of compounding.
For a better understanding of the concept, here is another example:
How would you do it if you have a lump sum of Rs. 2,000 and want to invest it in a mutual fund? For the next two years, you decide to invest Rs. 10,000 every month through SIP instead of investing the entire amount in one go. Investing 10,000 over two years would result in a total investment of Rs. 2,40,000 (10,000 x 12 x 2).
The average return on your investment would be 12%, resulting in approximately Rs. 2,75,000 (2,40,000 x 1.12^2). Even though you invested less every month than in the first example, you still managed to build a corpus of Rs. 2,75,000 after two years using an India FD calculator.
As a result of these examples, SIPs are a useful tool for investors who wish to invest and save in a disciplined manner. Building wealth over time is possible with compounding and long-term investing.
