Systematic Investment Plan, or SIP, in mutual funds is turning into the gold standard of investment for the common Indian who is keen to reap the benefits of a rising equity market in the country. The amount of money flowing into the market through the SIP route crossed Rs 24,000 crore to touch Rs 24,506 crore, in September 2024.
The reason why SIPs have caught the fancy of Indians is that they offer the convenience of tuning the quantum of investment and the frequency of investment with the huge power of creating wealth over the long-term, thanks to the power of compounding, which is a characteristic of the science of numbers and doesn’t depend on the markets.
Most convenient mode
One has to keep in mind that SIPs are just a mode of investment and not an instrument. It’s the means to an end. Now let’s see how long will 4 persons take to create a pool of Rs 2 crore. Let them invest Rs 5,000, Rs 7,500, Rs 10,000 and Rs 12,500 a month and let all of them be rewarded with a standard 12% return on their investments.
Rs 5,000 per month
Assume a person begins to invest Rs 5,000 a month from the age of 25, when he/she starts earning. An SIP calculator will tell you that he/she will take 32 years to accumulate Rs 2 crore – Rs 2.25 crore. In fact, after 31 years, the investor will achieve a pool of more than Rs 1.99 crore. So, by the age of 57, he would be sitting on a corpus of Rs 2.25 crore.
Rs 7,500 & 10,000 per month
Person B invests Rs 7,500 a month or 50% more than person A. B will take 28 years to ramp up Rs 2.06 crore. Now, consider person C putting Rs 10,000 every month in SIPs. This individual will need 26 years to cross a value of Rs 2 crore in the portfolio. In fact, after 26 years, C will achieve a value of Rs 2.15 crore in the portfolio.
Rs 12,500 a month
Person D puts in Rs 12,500 every month in SIPs. This person will take 24 years to achieve a total value of Rs 2.09 crore. Investments advisors always recommend that one should invest an amount through SIP that does not create stress for them since it would be continued in the long-term for best returns.
There is no let-up in the relentless march of the Systematic Investment Plan, or SIP, that has attracted inflows in excess of Rs 24,000 crore in September for the first time. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
