Are you grinding yourself in the monotonous 9 to 5 job? And while doing so unable to generate optimum wealth? One way to accumulate wealth over the years is investing in mutual funds.The benefits of mutual funds are endless and can be a great way to grow your wealth.But, are you one of those investors who face troubles with mutual fundsconundrum? When it comes to mutual fund investments, investors usually feel the heat about selecting the apt mode of investment for them. Fret not. In this article, we’ll cover how you can become rich by investing in mutual funds via SIP mode.
What is an SIP investment?
Systematic Investment Plan, also known as SIP is a mode of investing in mutual funds online. Under the SIP scheme, an individual contributes a fixed amount regularly in their preferred mutual fund investments at fixed intervals. The periodicity of the investments and the investment amount are pre-determined by the investor. Based on the Net Asset Value (NAV) of your mutual fund scheme, you are assigned a certain number of units each time you invest. This might vary each time you invest via SIP.
How can SIP make you rich?
Investing in mutual funds via SIP can prove one of the best ways to grow wealth. This is because SIPs work on the principles of the power of compounding and rupee cost averaging. Let’s understand these two principles:
- Power of Compounding
SIP mutual funds are designed in a way to amplify your money by harnessing the power of compounding. The power of compounding works when earnings are earned by reinvesting your earnings. The returns that you earn from an investment, become the part of the next compounding cycle.In short, your money works on its own to make more money. A lot of investors even claim the power of compounding as the eighth wonder of the world.
- Rupee Cost Averaging
Investing in mutual funs through SIP mode requires regular investing irrespective of the market condition. When you regularly invest a fixed amount for a considerable period, you are bound to earn better returns than the lumpsum mode. This is because over the period, SIP investments average out the purchase cost of units of the mutual funds. This is because you end u purchasing fewer units when the market is high and vice-versa. Thus, the cost of your mutual fund averages inspite of market volatility.
Thus, by utilizing these two core concepts of investments, SIPs have constantly proved to be a safe and powerful tool for investment. What’s more unlike other modes of investments such as lumpsum mode, it doesn’t require you to time the market, which is usually not an easy task to do.
Remember the early you start, the more you reap the benefits of SIP investments. You can also avail an SIP calculator to analyze the true value of your investments upon maturity. Happy investing!