How Do SIP Investments Help in Wealth Creation?
Creating wealth is not easy. However for wise and disciplined investors, it is not difficult either. Apart from the traditional ways of saving, i.e., FDs (Fixed Deposits), you can also opt for SIP investments. A Systematic Investment Plan (SIP) is one product that can assist investors in creating capital. The SIP is an essential and time-honored investment technique for disciplined capital accumulation over a long-term period.
The most significant benefit of SIP is that disciplined spending is made possible by your daily/monthly savings. To begin investing in mutual funds through SIP, you do not have to wait to create a large savings corpus. You can start with just a minimal amount of Rs.500. Through the power of compounding, investing small sums consistently over long periods of time will help you generate significant wealth for investors. For better planning, you can use a SIP calculator to get an idea of your mutual fund returns.
Read on to know more.
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SIPs allows individuals to invest a fixed amount per month in their preferred mutual funds. The daily investment pattern helps to instill a positive attitude towards investment and encourages a corpus formation through it.
What Does SIP Mean?
SIP (Systematic Investment Planning) is not a form of a mutual fund (MF) scheme. It is a way of investing in a scheme for mutual funds. The SIP facility enables you to invest a fixed sum of money in a selected mutual fund scheme at pre-defined intervals. Using a SIP calculator will allow you to estimate the returns on your mutual fund investment. You can use a SIP calculator from reliable financial institutions like Axis Bank.
It enables you to invest in a time-bound manner without thinking about the market conditions by taking the SIP route to investments and stands to gain in the long term due to the average cost and compounding capacity.
SIP for Wealth Creation
We will now explore how SIPs help in generating significant wealth over time.
What does compounding mean? Essentially, compounding is interest earned on interest, or benefit earned on benefit. If you invest Rs 1 Lakh at 10 % interest, then you will receive an interest payment of Rs 10,000 after one year. If you let the money stay invested for five years, however, then your interest won’t be Rs 50,000; your interest will be more than Rs 61,000.
It is not just your investment (principal) that earns interest or dividends while you stay invested for a long time. Income or returns are often gained from your retained income or your deferred gain. This is how it works with compounding. To determine the amount you want to invest, use a SIP calculator available online.
Time is the most significant compounding element. The longer you work, the more money you accumulate, which helps you earn even more money. This is a virtuous cycle and helps you generate tremendous compounding strength.
Here’s why you should invest in SIP:
- Easy on your pocket as you can start with an amount of Rs. 500. So, it ensures no financial difficulty.
- No need to time the market for higher returns.
- The flexibility of choosing the amount and periodicity.
- You can customize or choose a step-up plan to increase the installment amount.
- SIP ensures financial discipline, enabling creation of wealth.
Now that you are aware of the wonders SIP can do towards wealth creation, you must plan it efficiently. Reputable banks such as Axis Bank allow you to easily start a SIP online. They also provide a SIP calculator to help you estimate the mutual fund returns.
So, ensure financial discipline, and accomplish your financial goals with SIP in an easier way!