SIP Investment: To achieve financial stability and a strong financial foundation, simply earning money isn’t enough. Investing that money in the right place is even more important. Many people, despite limited income, amass wealth worth crores by making wise decisions over the long term. However, many others, due to a lack of understanding of investment options, make wrong decisions and suffer financial losses. Therefore, it’s crucial to have complete knowledge of the available options before starting an investment. One such option is a mutual fund SIP, which is considered an effective means for small investors to build long-term wealth.
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Why is SIP a better investment in mutual funds?
SIP, or Systematic Investment Plan, allows investors to build a large corpus from small amounts. This method is especially beneficial for those with limited income but who can invest with discipline over a long period of time. The biggest advantage of SIP is that you can start investing with just Rs. 250 or 500 per month. According to market experts, SIPs can potentially yield returns of up to 12 per cent if invested over a long period of time. Although this depends on market fluctuations, this method is considered safe and profitable in the long term.
A small amount can create a corpus worth crores
Many people believe that building a large corpus is impossible with a low income, but SIPs make it extremely easy. If you invest ₹2,000 per month and increase your SIP by 10 per cent every year, you can create a corpus worth approximately ₹1.59 crore over a period of 30 years. The full benefits are reaped by starting investments at a young age, as the effect of compounding increases exponentially over time.
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SIPs provide better returns
SIPs bring discipline to investing and significantly reduce market risk over time. Since this investment is made with a fixed amount every month, both market highs and lows are averaged out. Apart from this, future financial goals can be easily achieved by increasing investment with increasing income.