How to become rich through SIP: Kaun Banega Crorepati? Answer is you; Explained – How and Why

By: | Updated: May 18, 2018 7:28 PM

Investing your money wisely is important to get the best return out of your investments. People are constantly on a look-out for ways to turn their hard-earned money into a big fortune.

Investing your money wisely is important to get the best return out of your investments (Reuters).

Investing your money wisely is important to get the best return out of your investments. People are constantly on a look-out for ways to turn their hard-earned money into a big fortune. One of the most popular and trustworthy investment schemes nowadays is the Systematic Investment Plan (SIP). SIP is a hassle-free way to invest money in mutual funds. SIP allows customers to invest a certain amount at regular intervals. It is a systematic approach towards investments and helps subscribers to save money and build wealth for the future.

Under the SIP plan, money is automatically debited from the customer’s account and is invested into a specific mutual fund scheme. Subscribers are allocated a certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.

Every time a subscriber invests money, additional units of the scheme are purchased at the market rate and are added to his account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.

But why SIP?

SIP gives better returns if investments are made mostly in equity funds because equities are growth assets and have the potential of delivering far more returns than any other assets in the long term. Sensex has delivered an annualised return of 12 per cent over the period of 20 years. In comparison to that, gold has offered returns in single digit while bank FDs are currently delivering around 7 to 8 per cent returns for a 10-year period.

Golden Question: How to become crorepati?

The key to reaching your goal is to start as early as possible. The early you start. the more beneficial it is for you. Let us assume you start investing at the age of 20 and invest Rs 2000 per month with an expected return rate of 10 per cent per annum. By the age of 60, you will invest Rs 9,60,000 and accumulate Rs 1,27,53,560 (Rs 1.3 crore approx). If you increase the amount to Rs 5000 per month with the same interest rate, you are expected to earn Rs 1.1 crore by the age of 50. Therefore, your accumulation will also depend on the time you stay invested.

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