We all have that long-distance relative who regularly invests and tracks the capital markets. They are often considered the go-to person for anything market-related. They have years of experience in the markets and have seen the SENSEX at 6000 odd levels back in 2000 and at its all-time high of 62245 last October. Have you ever wondered how they have amassed so much capital? How have they increased their wealth over time? The answer is almost always specific; they chose SIP investing.
SIP, or the Systematic Investment Plan, is a mode of investment where you can invest a fixed amount at specific intervals in mutual fund schemes. SIP investment is one of the best ways to invest in mutual funds as anyone with a regular income can invest and earn steady returns. Today SIPs are not just limited to mutual funds only. One can have SIPs in stocks, gold, crypto, etc.
Imagine there are four investors: Varun, Gita, Henry and Mira.
Varun - 10 years
Henry - 20 years
Anurag- 30 years and
Gaurav - 40 years
All of them invest ₹2,000 per month in an equity fund through SIPs.
Assuming the equity fund offers an annual return of 12%, here’s how much each one could earn by the time they turn 60:
|Name||Monthly SIP (₹)||No. of Years||Investment Amount (₹)||Wealth Gain (₹)||Final Corpus (₹)|
|Varun||2000||10||2.4 Lakh||2.2 Lakh||4.6 Lakh|
|Henry||2000`||20||4.8 Lakh||15.2 Lakh||20 Lakhs|
|Anurag||2000||30||7.2 Lakh||63.4 Lakh||70.6 lakh|
|Gaurav||2000||40||9.6 Lakh||2.3 Crore||2.4 Crore|
We neglect the charges incurred due to expense ratios
An ideal way to make money in equities is to buy more when the markets are low and buy less when the needs are high. In an SIP you automatically end up doing so and saving yourself from the volatility of the markets. One must also realise that time spent in the market is more important than timing the market. Pullbacks and corrections are part of the market cycle, they are bound to come and you as an investor should be happy that you can buy more in these opportunities and not get scared of the short-term uncertainty.
Hence, if you are aiming for long-term capital appreciation, then start your SIP as soon as possible.
Happy and safe Investing!
There is no ‘good’ or ‘best’ time to invest through an SIP. The best thing about SIP investments is that you don’t have to time the market or wait for the perfect opportunity to invest. Once you select a particular fund to invest, you can choose any date of the month and invest regularly. Automate your investments to make the entire process simpler.
A tenure of 5-6 years is advised to create a good portfolio via SIPs
Most AMCs and fund houses have the option of setting up an SIP for each of their schemes. In case you invest in mutual funds directly, contact your discount broker or financial adviser for assistance. But before that, complete the necessary formalities and furnish your KYC details to the Asset Management Company (AMC).