Systematic Plan

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Running a full marathon can sound like an impossible feat. Yet, many people take part in marathon runs each year and successfully cross the finish line. And the only way to do this is to take that first step and continue putting one foot after the other. In your personal life too, you may have many financial dreams that may seem too big to achieve. But when you have a systematic investments plan in place, you can conquer your dreams and goals. You just need to start investing.

1) Break down large goals through SIP
Everyone has big dreams for their future: buying a duplex house, taking the family on a wonderful tour to South America, creating a large retirement fund for a comfortable future and so on. All of these goals are ambitious. But the truth is they are achievable.

Take the following example: Based on your current income, expenses, and lifestyle, you find out that you require a minimum fund of Rs. 8.5 crore for your retirement. Here is the tough news: you cannot create Rs. 8.5 crore overnight. The good news: you don’t need to.

With time on your hands (especially if you are in your twenties or early thirties), you can comfortably reach this goal if you invest regularly through a Systematic Investment Plan (SIP). If you invest Rs. 20,000 per month through a SIP in a mutual fund that offers an average return of 13% per annum, you can create a corpus of Rs. 8.8 crore in a period of 30 years.

2) Benefit from compounding
Compounding is a concept in finance where the money you earn, starts earning money for you. For example, when you invest Rs. 1,000 in a mutual fund that offers 10% returns per annum, you earn Rs. 100 at the end of the year. Now, by reinvesting this amount in the fund, you start earning returns on the additional amount too.

compounding is a very important aspect of investing because of its immense power. Imagine you start investing Rs. 10,000 per month through a SIP at the age of 50. At the time of retirement, you earn a sum of Rs. 25 lakh (average return of 13% per annum).

But if you start investing from the age of 40, you would earn a return of Rs. 1.1 crore and if you started at the age of 30, you would earn a corpus of Rs. 4.4 crore! In other words, your returns magnify when you invest for a longer time period. That’s why systematic investments from an early age can help you achieve huge returns.

3) Rupee cost averaging
Another benefit of systematically investing is rupee cost averaging. Traditional wisdom suggests that you invest when the market is low and book profits when the market is high. However, identifying the right time to make your move can be quite difficult. However, you can do away with market timing by simply investing in SIPs regularly. This allows you to buy more units of the mutual fund when the price is low. This move reduces your overall cost of purchasing the fund in the long run.

4) Start small, grow big
The general assumption is that you need to invest a large amount of money if you wish to earn huge returns. However, SIPs allow you to start with small amounts. So you can begin your investment journey with Rs. 1,000 or even Rs. 500 per month. This allows investors of all financial backgrounds to make investments in mutual funds. And as your income levels rise, you can gradually increase your investments one step at a time. 

Conclusion

It is good to have lofty goals for your future. They allow you to dream big for yourself and your family. And with proper financial planning and systematic investment, you can actually make these dreams a reality. So take that first step today to experience a better future.