We all imagine living a lavish lifestyle, but not everyone is willing to invest or save. The idea is not just to save consistently but also to invest consistently, as a long-term investment will eventually help you make money. And a systematic investment plan is perhaps the most effective way of making money. But what is a SIP and how can you make money?
What is a SIP?
SIP, or Systematic Investment Plan is a disciplined investment route offered by mutual funds. Using this route, you can invest in mutual funds using smaller deposits instead of saving a lump-sum amount for investing. This makes investment for the youth easier as you don’t have to save months of income; you can just invest small amounts ranging from Rs 500 to Rs 15,000 depending on your income.
SIP gives you the liberty to set a fixed amount and invest at regular intervals, just like recurring deposits in a bank. in addition, you can also keep increasing the amount with your increasing income.
If you decide to invest Rs 1,000 in an SIP with a return rate of 12 per cent rate for 10 years then you will invest Rs 1,20,000 and get a return of Rs 2,32,339.
How does it work?
Just like investing in a FD or recurring deposit you select a mutual fund and give your bank instructions to monthly or quarterly deduct a set amount on a specified date. This means that you will keep investing without having to set reminders or put in the effort to manually do it.
How much will you be able to save?
The amount at the end will depend on how much you invest and for how long you want to invest. Taking the example above, if you have invested Rs 1,000 per month with the same interest rate, then in 15 years you will be making Rs 5,04,576. So the longer you invest, the higher the returns. If, on a yearly basis, you increase the amount you are investing, then the amount will again increase.
These may seem easy while reading, but investing is a process. If you are in it for the long haul, you will make more profit, but if you are not consistent with it, you might not get the outcome you are looking for.
How does SIP benefit you?
One of the most important benefits of an SIP is that you don’t need to have expertise in the market and don’t have to worry about the timing. An SIP will help you take advantage of market volatility without having to worry about selling or investing.
What makes SIP even more attractive is that you get tax benefits for investing. You can get up to Rs 1.5 lakh every year under the 80C when you are filing your income tax returns.
But before you begin investing, it is always better to understand what SIPs are available in the market and which one suits you the best. Slowly and steadily, you will be able to invest enough to live the luxurious life you’ve always dreamed of having.