SIP Investment: Apart from this, SIP helps people to stay invested during market ups and downs. When it falls, he can close the investment by selling his securities and when it rises, he can invest more.
Systematic Investment Plan (SIP) is an investment tool offered under mutual funds, in which a fixed amount is invested at regular intervals (monthly, quarterly or other options) instead of investing in lump sum. You can start investing through SIP with a minimum of Rs 500 per month.
It is like a recurring deposit and for this you can also allow your bank to auto-mandate (i.e. debit the prescribed amount on time). With this money, units of the fund are purchased at the applicable NAV (Net asset value), which earns returns based on the portfolio of stocks held by the fund. The specialty of SIP is that it can help in creating a big corpus without putting pressure on the pocket. Through this you can prepare a corpus worth crores also.
How to reach target amount
Let us assume that you are getting about 12 percent annual return on investment. In such a situation, if you invest Rs 10,000 per month, it will take about 20 years for you to reach Rs 1 crore.
A monthly investment of Rs 30,000 will take about 12 years to reach your first Rs 1 crore and 20 years to reach Rs 3 crore. However, if you can increase your monthly SIP amount by 10 percent every year, you can reach Rs 1 crore in 10 years and Rs 3 crore in 16 years.
Why SIP better?
Investing in mutual funds through SIP helps investors average out the cost of their investments. Besides this, it also helps in developing the habit of investing as every month a part of your salary is deducted from your account and invested.
Apart from this, SIP helps people to stay invested during market fluctuations. When it falls, he can close the investment by selling his securities and when it rises, he can invest more.
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