With the propensity to compound your wealth over time, a SIP can gradually grow your wealth, aligned with your regular growth in income. Thus, over a long span, you get good returns, even if you invest small amounts initially. The fact is, your gains can be reinvested and you get the effect of compounding which is positive in terms of earning returns.
Go ahead and ask the majority of investors what their goals are. Most will undoubtedly tell you that they want to become rich. As each generation comes and goes, the general consensus is that investors want to become, not only rich but rich quickly.
This is, of course, easier said than done for most investors, but you can start investing early and earn good returns in the future. How? Through an efficient mode of investment called a systematic investment plan or a SIP.
Seasoned investors will tell you that a SIP is the simplest, no-nonsense way to generate returns over a period of time. If you wish to know how much of a return to expect in a fixed amount of time from a SIP, you can use an electronic online SIP return calculator to give you this information at a click.
Rather Invest Than Not Invest
In case you are new to the investment scenario, but know one thing for sure, that you would rather invest your money than spend it, or have it lie in a bank account, then it’s likely that a systematic investment plan will interest you.
Especially if you have just begun your career journey, you may not have large sums to invest at the start. If you try to sign up for a mutual fund, you may have to dish out a large lump sum to start your investment.
Not everyone has that kind of capital. If you wish to invest small sums of capital in a regular manner, you can go in for a SIP. With a SIP return calculator, you can find out the returns you may potentially make with a particular SIP.
Understand What a SIP Is
So now you have understood that you can invest small sums of money and earn returns with a SIP, but do you know what a SIP actually entails? You won’t know how to use a SIP return calculator if you do not know how a SIP works. Therefore, to start investing small sums to get good returns, you should first be clear as to how SIP works.
A systematic investment plan is a mode of investment offered by mutual fund houses, letting investors invest small amounts of money on a regular basis. Your capital is invested in a mutual fund of equities, but instead of investing a large sum at a single time, you can invest small amounts, as small as Rs. 500, regularly.
The frequency of your investments could be weekly, monthly or quarterly, depending on the mutual fund you select. The beauty of a SIP is that it allows small investors to allocate small amounts, depending on what returns they wish to achieve. Furthermore, a SIP return calculator can help investors to decide how much to invest.
SIP Customisation
Besides the convenience that a SIP gives you in making small investments that suit your needs, you have the ability to customize your SIP, according to the returns you wish to get based on calculations using a SIP return calculator.
Let’s say that you begin with the minimum amount of just Rs. 500 per month, that is Rs. 6,000 a year, you can easily distribute the amount and invest daily, weekly, fortnightly, monthly, and so on. This works to your advantage, depending on the funds you have at your disposal. Today, the majority of asset management companies permit customization to make life hassle-free for potential investors.
With all the facilities you have at your feet to make calculated sound decisions regarding investment, like using a SIP return calculator to decide your investment amount, you can even sign up for a step-up SIP. This is where true custom-made applications to a SIP come into the picture.
Let’s say you have already started a SIP. You may have initially begun with a monthly contribution of Rs. 5,000 per month to your SIP. Now, let’s assume that your income has increased and you wish to invest more in your SIP. Can you do this? Yes, you can. It is possible for you to increase your SIP amount by 10% or 20% in the year following your initial investment.
Small Sums, Good Returns
If you invest small sums in a SIP, you still have the potential to earn good returns in the long run. If you have made a decision to start a SIP with a particular sum based on your findings in a SIP return calculator, you can expect fruitful gains due to the compounding power that a SIP gives you.
In the past few years, SIPs have been generating returns amounting to 15%-18%. These returns, when reinvested in the SIP, have a compounding effect to earn you more in the future.
While you use a SIP return calculator to gauge your returns, you may discover that increasing amounts of your SIP contributions can make your returns increase more.
The Advantages of Small SIPs
A SIP lets you build discipline in your investment habits and this gradually helps you to invest instead of spend. Here are some more clear advantages of investing small sums of money to earn large rewards in the long run:
● You don’t have to time markets – When you invest in a SIP with a small amount, gradually building your investment, you do not have to frequently watch market increases and decreases. If you invest a large sum, like in a regular mutual fund, you may be apprehensive about your investment and constantly check market movements.
● You get good returns with a SIP, especially if you have used a SIP return calculator to judge how much to invest initially. Investing in a SIP average out any expense ratio (which is a big part of regular mutual fund expenses). This means that SIPs save you money and you end up with higher returns.
● You get to save tax so tax payments do not eat into your earnings. For instance, if you invest in an ELSS fund by way of a SIP, your investments are non-taxable up to 1.5 lakh per year (financial year) based on Section 80 C of the Indian Income Tax Act.
● You get the advantage of rupee-cost averaging in a SIP. What this translates to is that the longer you remain invested in any SIP, the better the chances for higher gains.
SIPs Can be Powerful
With the propensity to compound your wealth over time, a SIP can gradually grow your wealth, aligned with your regular growth in income. Thus, over a long span, you get good returns, even if you invest small amounts initially. The fact is, your gains can be reinvested and you get the effect of compounding which is positive in terms of earning returns.
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