All about Systematic Investments Plan (SIP)

Become Rich with Systematic Investment in the Stock Market

Do you want to become rich with Systematic Investment for a longer period of time? How many of you are already rich and made enough money for your lifetime? If you already are in this category, the chance of you continuing to read this article will be extremely less. How many of you want to become rich and are on the right path? I am sure almost all of you would want to retire early and do the things which really mean something in your life. Many people struggle whole day and night at work, losing a lot of family time and aspiring that one day, they would be relaxing in some nice location without any tension or stress.

In the stock market, most people get in to make some extra money. They put money in a listed company hoping that it would grow really fast. But, does it really work? Ask yourself this question. Have you really created enough wealth in the Stock Market? Many times, it is seen that lots of investors have not chosen good, quality companies and have purely invested on tips they get from outside sources without their own knowledge and research. Also sometimes they would have slightly got their timings wrong. The stock they have chosen would be around 20% below their buying price (I am sure we have all experienced this). But, as we all know, no one can time the market. Also, they do not give enough time for their investments to start churning out wealth.

So Beloved Friends, the Stock Markets is a Wealth Creating Machine. Considering the inflation, this is one of the best forms of investment. But the matter of the fact is that most of the people gamble their money away in the same markets and lose out heavily, where a few people create massive wealth? What is the secret? How do some people really create massive wealth? We all work for money. Have we ever tried making money work for us.

Most of us would have heard about SYSTEMATIC INVESTMENTS PLAN (SIP). Please remember that SIP is not a product or a company. It is a discipline, it is a mindset, it is an approach to investing, and it is a long term vision with high amount of patience.

A SIP is a strategy where we allocate a fixed sum of money to be invested in an instrument at a regular interval of time (mostly monthly). We have various instruments to invest in, like Recurring Bank Deposits, Various Post Office Schemes, Fixed Deposits, Mutual Funds, Equity etc.

Most of us would have invested our money in a Fixed Deposit or Provident Fund. In this case, the rate of interest will be stated clearly before we begin with the investment and we are assured of the interest percentage and amount. Whether, the interest given can beat inflation or not, is a big question. The purchasing power of money declines over time. Fifty years back, the value of Rs 100 was much more than what it is today. In the next 20 years, the value of Rs 100 will diminish much more.

In this case, a SIP in Mutual Funds seems to be a better choice.

A SIP in Mutual Funds gives us the following advantages

1) It creates a habit of savings and investing regularly. When we get our salary every month, we generally spend first and invest the remaining (if it remains). This approach will never give us returns in the long term. We need to change this habit and start parking a certain amount regularly into a money creating machine.

2) Many times, we would not have a lump sum in hand. In this case, investing a small amount of money every month would not be very difficult. SIP is the best example for that.

3) Never invest the money which you need immediately. A SIP is designed for investors to park their extra money without touching it for longer period of time.

4) The law of averaging helps investors in SIP. When we buy funds of an Asset Management Company (AMC) every month, we will get advantage of both rise and fall of its funds price. If the companies are going to do well in the longer horizon, we will get the full benefit of it.

5) If the companies revenues grows at a significant rate (more than 10-12% every year), we will start compounding our money.

A SIP in Mutual funds has the following disadvantages also

1) If we go for a SIP in a low quality funds, we are bound to be in trouble. We need to choose high quality funds.

2) Since we invest the amount in a fund regularly on a particular date of the month, we might not get it in the best price of the month.

3) A SIP will work for investors with a long term horizon, since SIP's can create enormous wealth in 5 - 10 years of time. You might not get immediate returns.

The bottom line about investing in Mutual Funds via SIP's route is that with Discipline and Homework, we all can create massive amount of wealth in the long term. Systematic investment in quality, dividend paying funds can yield a lot in the longer term. But patience is the key.

As we all know it, the intelligent time spent in the markets is far more important than trying to time the markets.

Keep investing in SIP's, Hold on if already invested. Don't create & spread panic.

No matter what happens, we will beat this too the way we have beaten all of them in the past.

THIS TOO SHALL PASS. 

Stay safe, Stay Humble, Remain Down to Earth, Don't break the lockdown, Feed the poor. They need our support more than anything else during these tough times.