Home economics is no stranger to ‘The power of small’. Yup momeys, I am referring to the small savings we manage every now & then.
We have all had situations where a little fortune out of our savings kept aside bailed us out of unforeseen situations. A medical emergency, unexpected wedding or birthday shopping, unplanned purchases for home or self, numerous ocassions can pop up when small sum plays a big role.
This post is to draw attention to a fast gaining investment feature called SIP – Systematic Investment Plan.
SIP or ‘the good EMI’ as it has been fondly called is a sure shot way to make your small savings grow. To give some background, SIP is a feature offered to MF investors. Mutual Fund is a collective pool of money in which various investors put their money for returns. This pool is managed by experts who in turn invest it further to fetch gains for their investors. Now to invest in a mutual, there are 2 ways – lumpsum which you can do one time and second is SIP.
SIP is any fixed amount (starting Rs. 500) that can be invested every month on a set date into a mutual fund scheme of your choice.
Now comes the real part. SIP is increasingly being used by investors because of 2 main reasons:
1. Flexibility to invest small sums over a period of time.
2. Great returns due to the power of compounding.
An investment has to be given time to give worthwhile returns. And when you invest through SIP, you turn little sum into big money. As you invest month on month, your base increases – sum you are investing plus the returns keep getting added. This is how you benefit from compounding. To explain better, suppose you put Rs. 2000 every month in SIP for 10 years. The principal you have put is Rs. 2,40,000. With a modest rate of return of 12.5%, you will have Rs. 4,78,763 at the end of 10 years. You can use this calculator to find out more: https://www.mysiponline.com/sip-calculator.php
This supersedes any Recurring deposit returns you will make over long term. Mutual Funds are seeing unprecedented interest from new investors and SIP is becoming a favourite. But you don’t have to follow anyone for the heck of it. You can do an SIP for the sheer benefit it brings. Just resolve to make small savings into big as a first step and rest will fall in place. Start today!