Systematic Investment Plan - the easiest and most definite way to create a long-term wealth

Finance    09-Sep-2021   
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We all dream of getting rich, but some of us get rich and the rest just keep dreaming. Getting rich is not the magic only a few people know. A systematic long-term view of money is needed. Having that view should be imbibed as an attitude.
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Robert Kiyosaki has famously said, 'The poor and middle-class work for money, rich people make money work for them’. It is up to us to decide which class we want to fall into. Naturally, it is the dream of all to become rich. It is not possible to become rich ‘legally’ overnight, it should be done in a gradual manner. The easiest way to achieve that is by investing in a SIP (Systematic Investment Plan).

Why SIP?
 
  1. Many a drop make an ocean! The right way to create long term wealth is to make small investments regularly and consistently.

  2. SIP is like a recurring deposit but not in a bank, in a mutual fund.

  3. In SIP, a certain amount (instalments) can be invested in the selected fund at a preselected time (daily, weekly, fortnight or monthly).

  4. These investment instalments can start from as low as Rs 100.

  5. Unlike a fixed or recurring deposit, SIP can be continued for as long as the investor wants.

  6. SIP can also be temporarily suspended for up to 3 months. No charges are levied. This facility is very helpful in case of temporary job loss or business slowdown, especially in uncertain times of Covid.

  7. SIP can be stopped any time, there is no lock in period for it.

  8. SIP helps to invest in the stock market with reduced risks and good returns.

Though the economy is in a recovery mode, the future of jobs, salary hikes and businesses is mired with uncertainty like never before. The importance of saving is undeniable. It is also true that mere saving money will not create wealth. It will create a corpus which is available for investment. Making informed decisions on where to invest the saved money is of paramount importance.
 
A basic principle should be followed: The investments should be able to generate return higher than the rate of inflation prevalent in the country. Only then, will the value of money will increase over a period.

The interest rates offered by banks are at an all-time low and have fallen below 6 per cent. On the flip side, petrol and diesel prices have never been so high. There is no doubt that inflation will rise.

The working class always feels that their employer or businessman has a “kubera kalash”, but the owner must manage everything like the capital needed to build a business, meet the working capital requirements, the infrastructure to start a business, etc. The return on business investment matches the risk he is taking. The easiest way to get those kinds of returns is by investing in the shares of the company and co-own it. This can be done by investing in an IPO or through the stock market.
 
Most of us are so risk averse that just the mere mention of the stock market makes us look the other way. The easiest and least risky way of investing in the stock market is through a mutual funds.

Some of the benefits of SIP:
 
  1. There is regularity in your investments.

  2. It helps to imbibe savings habits.

  3. Deciding the right time to buy and sell in the stock market is a difficult task. Timing the market is impossible even for seasoned investors. SIP solves this problem.

  4. When the stock market is booming, fewer units of a fund are bought, and when there is a slowdown in the stock market, more units are bought. This helps in reducing the cost of the unit on an average.

  5. If the dividend reinvestment or growth plan is chosen while investing in a SIP, one can get the benefits of compounding.

  6. The longer the investment period the better the results.

Things To Remember:

  1. Don't just dream of getting rich, start SIP.

  2. SIP investment helps weather the shocks of the stock market.

  3. SIP is a small thing that works to become very big.

  4. No tips can ever help to achieve success in the stock market, instead the smart thing is to rather depend on a SIP.

  5. Start investing SIP and be rest assured.
SIP Systematic Investment Plan long-term wealth investments finance economy