Systematic Investment Plan (SIP)
The Systematic Investment Plan is probably one of the greatest innovations in the investment and more particularly in the Mutual Funds industry. It helps you to inculcate disciplined investing habits and reduces the human emotions in decison making. As they say, the earlier you start investing, and the longer you stay invested, the more your money grows. Systematic Investment Plan simply involves investing a regular amount starting from as low as Rs 500 every month.
Suppose you start investing in a diversified equity mutual fund through a SIP at 35 years of age for Rs 5000 per month till the age of 60, you will have Rs 1,37,82,803.88 which is over 1 crore . However, if you invest the same Rs 5000 every month but start investing from the age of 40, you will have Rs 66,35,367.20 which is just over 66 lakhs. This is of course an hypothetical example but gives ample evidence of the benefits of SIP and the important rule of 'Wealth Management' i.e., to start early. Don't make the mistake of not understanding the benefits of SIP...if you care for your Personal Finance..