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Can SIP Make You Rich? Let’s Find out ​​

Many of us dream of being the next multi-billionaire, at least as far as their net worth goes, at least as far as their net worth goes. However, creating wealth is an uphill task that can take years. But there may be a straightforward method that can make you rich without the unnecessary hassles, burdens, and high investment values. The good old SIP has quite a few feathers in its cap. Let's find out how they can make you fly towards financial freedom.

SIP your way to the nectar of wealth

Short for a Systematic Investment Plan, an SIP is a method of investing in mutual funds. An SIP allows you to regularly invest small quantities of money over time into a mutual fund. As weeks, months, and years go by, your money compounds and earns returns. And there, you have yourself a large corpus that can be used to fund your financial dreams.

How does an SIP make you rich?

The simple answer is through the power of compounding. The power of compounding works on the multiplier effect.

The return you earn from your SIP is injected or reinvested in the market. This gains more return. As time passes, your money multiplies, and you enjoy capital appreciation. Thanks to the power of compounding, not only your principal amount but your return also earns return.

Say, for example, you invest Rs—1,000 through an SIP. You earn an return of 10%, which makes your investment Rs. 1,100. The mutual fund will now invest Rs. 100 also into the market. If you earn another 10%, your investment will be valued at Rs. 1210. This way, your money can earn return for as long as you stay invested.

Why invest through an SIP?

The power of compounding is only one of the advantages of SIP. There are several other SIP benefits too.

1. It allows you to invest as much or as little:

You can start an SIP of as low as Rs. 500 and increase your instalments as you please. This makes it easier to fit the investment into your budget. You can find an SIP in a college student's as well as in a working professional's portfolio. It is cost-effective and flexible and can appeal to everyone.

2. It offers the advantage of rupee cost averaging:

When the market rises, the SIP invests in fewer units as the mutual fund's Net Asset Value (NAV) is higher. Contrarily, when the market is falling, the SIP invests in more units as the NAV lowers. The SIP amount remains unchanged, but the number of units you purchase differs. This helps you in two ways. Firstly, your cost of investment gets averaged over the investment term. Secondly, you do not need to time the market to make strategic movements. The SIP automatically does this for you.

3. It regularises investments and builds financial discipline:

Procrastination, changing responsibilities, and mere forgetfulness can all stall your monetary growth. But when you automate an SIP and set a frequency, the fixed amount is invested in the mutual fund of your choice without fail. This ensures better financial discipline and helps you plan for your future without any lapses.

4. It lets you plan for varied goals:

You can invest through an SIP in different mutual fund schemes as per your goals. You can break down your investment budget according to your priorities and pick other funds. This streamlines the investment process and ensures that you do not neglect one goal to accomplish another.

To sum it up

It may be unrealistic to expect that a SIP can make you as rich as the personalities mentioned at the beginning of the article. But it may be able to speed up the wealth creation process and contribute to capital appreciation. Moreover, adding it to your financial plan can be a good decision because it is a convenient and seamless way of investing your money.

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Disclaimer:
Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/ Market Infrastructure Institutions'. For redressal of your complaints, you may please visit www.scores.gov.in . For more info on KYC, change in various details & redressal of complaints, visit mf.nipponindiaim.com/investoreducation/what-to-know-when-investing This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document. Language Disclaimer:
While utmost care has been taken in translating the article into respective regional language(s), in case of any confusion or difference of opinion, article available in English language should be deemed as final. The article provided herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional advice for the readers. The document has been prepared on the basis of publicly available data/ information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of loss of profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this article. "ABOVE ILLUSTRATIONS ARE ONLY FOR UNDERSTANDING, IT IS NOT DIRECTLY OR INDIRECTLY RELATED TO THE PERFORMANCE OF ANY SCHEME OF NIMF. THE VIEWS EXPRESSED HEREIN CONSTITUTE ONLY THE OPINIONS AND DO NOT CONSTITUTE ANY GUIDELINES OR RECOMMENDATION ON ANY COURSE OF ACTION TO BE FOLLOWED BY THE READER. THIS INFORMATION IS MEANT FOR GENERAL READING PURPOSES ONLY AND IS NOT MEANT TO SERVE AS A PROFESSIONAL GUIDE FOR THE READERS."

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