Why you should start an SIP?

The first reason is that it brings a discipline to save. And the second, the most important reason is that, it keeps you off mood swings. For example – If you decide to invest an amount every month taking time to check the market and then do it. Most of the time, you obviously get held up in some task and miss the investment. If you have the time, you would want to wait for a better price. Or think about your previous investment which is now in the negative and postpone the current one.

SIP removes all these worries about timing. It helps you have the investment happen automatic & accumulate wealth.

Axis mutual Fund has coined a tag line for SIP, Sleep In Peace. It is really so peaceful was of accumulating wealth.

Other benefits of an SIP

Apart from helping you average your investment cost which we had discussed there is one very big advantage in the SIP investment. It is the eighth wonder of the world, the magic of compounding. As the investment period is longer, the profit you earn in the first year earns similar profits in the second year and this multiplication goes on.

A ₹1000 SIP done for 10 years will have an average asset value of 2.75 lakhs at the end of 10 years. Where your contribution will be 1.20 lakhs over a period of 10 years & the profit generated will be 1.55 lakhs. Money has got multiplied 2.29 times.

Who should start an SIP?

There is no age limit or income limit to take advantage of this magic wealth creator. You can have a SIP for your just born child for his/her education or wedding expenses. You can start a SIP as soon as your first pay cheque comes to meet your goals like buying a car or a house.

You can start a SIP to accumulate a corpus for your retirement. A SIP even for a vacation, which many investors are now doing.

In Switzerland there are restaurants serving exclusive Indian cuisine because there are so many Indians visiting them. They have seen 60% increase in Indian tourists to their country. India is becoming wealthy and they are enjoying life.

Other benefits of an SIP

Apart from helping you average your investment cost which we had discussed there is one very big advantage in the SIP investment. It is the eighth wonder of the world, the magic of compounding. As the investment period is longer, the profit you earn in the first year earns similar profits in the second year and this multiplication goes on.

A ₹1000 SIP done for 10 years will have an average asset value of 2.75 lakhs at the end of 10 years. Where your contribution will be 1.20 lakhs over a period of 10 years & the profit generated will be 1.55 lakhs. Money has got multiplied 2.29 times.

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Ramesh Sigamani

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