Mutual Funds

Can SIP make you Rich? The SIP Potential.

Why SIP Has Potential To Make You Rich

People strive to grow their wealth. They work day and night just to achieve financial independence or achieve financial goal.

However, we have been doing it wrong all this time. Do you think it is possible to achieve all your goals on your salary?

Your fixed income is not the only source of your earning. Investment is another prominent source of income.


Earlier, it might have been impossible for everyone to step in the market and start investing. But, not any more. 

The introduction of SIP has led to creation of numerous opportunities for every class of the society.

You can start investing from as low as 500 every month.

Systematic investment plan are automated investing plans. By automated investment, it means that you do not need to be anxious about investment dates and amount every month.

When you set SIP on your investment, you opt for a criterion where a specified amount will be deducted from your account every month on a fixed date. 

SIP offers you a flexible platform for your investment. You can even change this amount after a specified period of time.

SIP helps you develop an ideal investing habit. 

Most of the investors choose SIP for their investment and wealth generation. 

But how does SIP have the potential to make you rich? Why is this method of investment opted above any other form of investment?

Compounding is the answer. The most important feature of SIP is compounding. 

A person can generate a fortune by the method of compounding in the long-run.

Compounding is the method of generating wealth by investing and reinvesting the corpus. 

Why is SIP a potential wealth generator?

There are other methods of investment present in the market apart from SIP. The lump sump is yet another famous choice of the investors. 

However, lump sump investment is a risky venture not an affordable method for all the sections of society.


Also Read: Exchange Traded Fund (ETF) vs Fund of Funds (FOF): What’s The Difference?

Listed are some features that make SIP a better investing option and a wealth generator:

Easy investment:

We all are well aware of the importance of investment. However, most of us tend to ignore this responsibility because of our busy schedule. 

After all, who has the time to track the market and make transactions?

Well, SIP lets you make an investment without hampering your busy schedule. You can invest in mutual fund through SIP and forget about the matter till the date of maturity.

You can set an amount and date on which the investment will be made, and you don’t need to worry about anything else.

Furthermore, you can invest as low as 500 every month through SIP.

This way, you not only fulfil your duty of investment and secure your future but also, you develop a disciplined investing habit which is important for wealth generation.

Rupee cost averaging:

The stock market is a place full of risk. The volatility can create a fortune overnight night as well as make you lose all your money. 

It is impossible for even professionals and experienced investors to predict the volatility of the stock market.

When, you invest in stock market you should already have a risk appetite. 

However, this risk can be minimized using SIP. And this can be done using the rupee cost averaging method.

When the market is facing a downfall that is, the NAV are low, investors can add more units of fund in their SIP account. 

This way, when the market is at boom period, the investors can sell their units at high price and get high returns.

In the same way, when the NAV is high, the investors will be adding units to their account but lesser than the previous situation. 

Returns:

SIP offer better returns on investment than FDs and other form of investment. In fact, the compounding adds advantage to SIP on the terms of return.

The bottom line

If you are planning to invest from SIP and want to make the best out of it, you should start investing as early as it is feasible for you to.

You should be disciplined about your investment and should not stop it in the midway.

Furthermore, you should have patience as it is a long-term investment plan.


Further Reading:

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