By Irshad Mushtaq
For low-income individuals, building wealth might seem challenging, but a simple and effective strategy like systematic investment plans (SIP) in mutual funds can make a significant difference. SIP allows you to invest a fixed amount monthly, helping you benefit from the power of compounding and disciplined investing.
Benefits of SIP:
1. Disciplined Savings: Automates your savings monthly, reducing the temptation to spend.
2. Compounding Returns: Reinvested earnings grow significantly over time.
3. Rupee Cost Averaging: Buying units at various market levels averages out the cost of investment.
4. High Returns: Historically, SIPs in equity mutual funds provide better returns (usually in double digits) compared to traditional savings options like fixed deposits (FD) or gold.
Examples of Monthly SIP:
1. Case Study:
– Irfana, Age 25, Monthly Income: ₹15,000.
– She starts a SIP of ₹1,000 per month in a diversified equity mutual fund with an average annual return of 12%.
– After 25 years, her total investment of ₹3,00,000 (₹1,000*12 months*25 years) grows to approximately ₹15,00,000 due to compounding.
2. Case Study:
– Amir , Age 30, Monthly Income: ₹20,000.
– He decides to invest ₹2,000 per month in a balanced mutual fund averaging 9% annual returns.
– In 20 years, his total investment of ₹4,80,000 (₹2,000*12 months*20 years) grows to around ₹13,50,000.
Choosing the Right Mutual Funds:
– Diversified Equity Funds: For higher returns over the long term.
– Balanced Funds: For moderate risk and returns.
– Debt Funds: For more conservative investors.
Getting Started:
– Research and Plan: Understand your goals and risk tolerance.
– Set Up SIP: Choose a reliable mutual fund provider and set up your SIP online or through an advisor.
– Monitor and Adjust: Regularly review your investments and make adjustments if necessary.
By consistently saving and investing in SIPs, even those with modest incomes can accumulate substantial wealth over time, securing their financial future without taking on excessive risk.
Consulting a trusted and experienced advisory expert can provide you with valuable insights and guidance tailored to your individual financial goals and risk tolerance. Don’t underestimate the importance of expert advice when it comes to making investment decisions!
- Learn from the insights of writer and investor, founder of MI Securities and Business Partner at Sharekhan! Reach out to him at [email protected] for valuable knowledge on financial matters
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