Introduction to SIPs:

Systematic Investment Plan (SIP) is an investment route offered by Mutual Funds wherein one can invest a fixed amount in a Mutual Fund scheme at regular intervals– say once a month or once a quarter, instead of making a lump-sum investment. The installment amount could be as little as INR 100 a month.

Power of Compounding:

SIPs offered by Mutual Funds are easily the best way to enter the world of investments for the long term, in order to maximize the end returns. So your mantra should be - Start Early, Invest Regularly to get the best out of your investments. 

This is because the compounding nature of investments can only work if there is sufficient runway. Given enough time, not only do investment returns add to a portfolio, but those returns generate their own returns, and so on and so forth. In this way, compound interest is what creates true wealth for investors over long periods of time.

Gaining popularity: 

SIP has been gaining popularity among Indian MF investors, as it helps in Rupee Cost Averaging (by buying more units when prices are low and fewer units when prices are high, thus averaging the purchase cost over time) and also in investing in a disciplined manner without worrying about market volatility and timing the market. 

The monthly SIP Contributions reached an all time high of ₹21,262 Cr in June 2024, compared to ₹14,734 Cr in June 2023.                                                                                             

Source: AMFI

SIP Calculator:

A monthly investment of INR 10,000 at an expected rate of return @ 12% per annum, will give the following returns:

As visible above, SIP works on the beauty of compounding.

DISCLAIMER: This blog is solely for educational purposes and not to offer any investment advice. Please do your own research or consult a financial advisor before making any investment decisions.