SIP- A time proven formula for creating long-term wealth
Written on Tuesday, August 4, 2015
By Team Bajaj Capital
Mutual Fund SIP (Systematic Investment Plan) in a diversified Equity Fund is time proven formula for creating long-term wealth. It is most widely accepted solution for a variety of long-term goals like children's higher education, children's marriage, house purchase and retirement planning etc. SIP is most simple concept which can be explained even to a layman, housewife, and people with limited financial background. Everyone understands the concept of recurring deposit in bank or post office. Mutual Fund SIP is far superior alternative to recurring deposit as it has a huge potential for capital appreciation over a long period with very limited downward risk.
SIP is the best weapon to combat volatility of Stock Market
If you have a vision for long term investment and wealth creation, SIP is the path you should follow to keep yourself safe against the wild swings of the market.
A disciplined approach towards investment
We still remember our childhood days when we used to save money regularly through piggy bank. Take the same approach with SIP as it instills regular saving habits. Upon withdrawal results would be same as it used to be with piggy bank, you would be surprised to see how your small but regular saving helped you generate a good amount of wealth over time.
Rupee cost averaging works better
Because of rupee cost averaging, volatility of stock market is better absorbed by SIP and it performs better than one time investment.
Power of compounding
To reap maximum out of compounding you need patience, so make it a point not to touch your investment and allow it to grow. Invest for a longer duration as it would yield you maximum. Go for duration of at least 5-10 years or make it perpetual
A perpetual SIP is one in which there is no end date. So, to make your SIP perpetual, you need to leave the end date blank and that it will continue till December 2099. If at any point of time you wish to discontinue your perpetual SIP, you can do so by sending a written communication to the fund house or you can inform your wealth manager.
#Mutual Fund investment is subject to market risk, please read the scheme document carefully before investing. Nothing in this blog is intended to be a recommendation to buy or sell any futures or options market.