Creating wealth and securing one’s future is a dream that most people aspire to fulfill. One of the most effective ways to realize this dream is through investment. A Systematic Investment Plan or SIP is one of the most popular and convenient forms of investment that helps individuals build wealth in the long term.
A SIP is a simple and hassle-free way of investing in mutual funds. Unlike lump-sum investments, a SIP allows individuals to invest a fixed amount regularly, say every month or quarter. The benefit of this approach is that it enables people to invest small amounts regularly, which accumulate over time and generate significant gains in the long run.
Investing in mutual funds has been one of the most rewarding investment options for Indians over the past few years. The Bajaj Finserv Mutual Fund, for instance, has delivered an annual average return of 12.72% over the past 3 years as of September 30, 2021. This is a testimony to the fact that mutual funds can create significant wealth for investors over the long term.
The power of SIPs comes from the compounding effect on returns. For example, if an individual invests INR 5,000 every month in a mutual fund with an annual return of 15%, then their total investment in 10 years would be INR 6,00,000. However, the value of their investment would be INR 13,94,000, almost 2.3 times the invested amount. Similarly, if the investment is continued for 20 years, the value of the investment would become INR 51,63,000, almost 8.6 times the invested amount. These calculations are based on the assumption of a 15% rate of return and do not consider other factors such as market risks or inflation.
While the long-term benefits of SIP investments are evident, it is important to note that mutual funds are subject to market risks. The returns on investments can vary depending on market conditions and the performance of the fund. Additionally, while mutual funds offer higher returns compared to traditional investment options like fixed deposits, they also come with a relatively higher degree of risk.
Therefore, investors must gauge all the pros and cons of trading in the Indian financial market before investing in mutual funds. They must also take into account their risk appetite, investment goals, and financial background before investing in any mutual fund or SIP plan.
In conclusion, Systematic Investment Plans present an excellent opportunity for individuals to invest small amounts regularly and accumulate and grow wealth in the long term. Mutual funds such as Bajaj Finserv Mutual Funds have consistently delivered high returns to investors over the years. However, investors must be mindful of the associated risks and make an informed decision after evaluating their options.
Disclaimer: Investments in mutual funds are subject to market risks. Investors are advised to read all scheme-related documents carefully before making any investment decision. The above-mentioned calculations are for illustrative purposes only and do not guarantee any returns.