A systematic investment plan or an SIP is the simplest way to invest regularly while achieving your financial goals. SIPs allow you to invest fixed amounts in mutual funds at regular intervals, helping you benefit from rupee cost averaging and the power of compounding. Over time, SIPs can generate substantial wealth, allowing you to achieve key life mileages faster including buying a house, starting a business, paying for your child’s education or planning for retirement.
Why SIPs work
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Discipline
The biggest benefit of SIPs is discipline. It helps you save and invest regularly without having to monitor the markets or time your entries and exits. SIPs instill a habit of regular investing that will serve you well for life.
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Rupee cost averaging
SIPs allow you to buy more units when prices are low and less when high. Over time, this lowers your average per-unit cost, resulting in higher returns than lump sum investing.
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Compounding
Compounding returns are when the interest you earn each year gets added to your principal, then earns interest itself. With SIPs, your money grows at a rate faster than the sum of the annual returns due to compounding. Even small investments can grow substantially over long periods.
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Flexibility
You can start an SIP with as little as Rs. 100 per month in most funds. Increase, decrease, pause or stop your SIP anytime based on your needs. You can also set up multiple SIPs for different goals in just a few clicks.
How to grow wealth faster with an SIP?
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Increase SIP amount
Once started, check if you can increase your SIP amount each year as your income rises. Even an increase of 10-20% can significantly boost your returns over the long run due to compounding.
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Start early
The sooner you start an SIP, the more time your money gets to grow. Even beginning with small amounts, regular investing over long periods can generate great wealth.
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Choose equity funds
For most financial goals, especially long-term ones, invest primarily in equity funds through SIPs. Equity funds generate higher inflation-beating returns than other assets over the long run. SIPs help balance out market ups and downs by averaging your entry points.
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Review and rebalance
Review your SIPs at least once a year. You may want to rebalance by starting new SIPs for other needs, changing fund allocations or increasing sip amounts in line with your income and risk profile.
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SIP calculators
Use an SIP calculator to see how much you need to invest monthly to achieve key goals like funding your child’s college education, buying a house or saving for retirement. Then set up SIPs to meet those targets and grow your wealth.
The key to achieving financial freedom is starting early, saving regularly and investing in assets that generate solid returns after all fees and taxes. SIPs in equity funds meet all these criteria, providing opportunity for your money to grow at a rapid pace and elevating you to life’s milestones sooner. Keep calm and SIP on! Your financial future depends on it.
