Don’t Let Behavioural Inertia Hinder Your SIP Growth

We have often heard that starting our mutual fund SIPs early can lead to greater wealth accumulation due to the power of compounding. While an early start does provide an advantage, many investors fall into a common pitfall—they do not increase their SIP amounts over time. The consequence? A reasonably sized corpus that does not fully reflect their wealth-building potential.[EasyDNNnews:PaidContentStart]

The issue stems from behavioural inertia. As your salary and disposable income increase over the years, your SIP amount often remains unchanged. You might feel content knowing you've started investing, but this comfort can be costly. By not adjusting your SIP in line with your income growth, you inadvertently limit your future financial potential, especially during your peak earning years.

Therefore, my advice is to break free from this inertia and increase your SIP amount in line with your income. The Step-Up SIP strategy can be particularly effective here. This approach involves increasing your SIP amount annually by, say, 5 to 10 per cent, in sync with your income growth. This minor adjustment can result in a corpus that is 60 to 70 per cent larger over 20 years compared to a static SIP started at the same initial amount. The key is consistently raising contributions, particularly during salary hikes, promotions, or when receiving annual bonuses.

Remember, starting early is only part of the wealth creation process. The real game-changer is periodically increasing your SIPs to match your growing financial capacity. Automating these annual increments removes the need for manual decision-making and ensures your savings rate keeps pace with your lifestyle improvements.

In this issue, we also explore another intriguing trend: 'Daily Vs Monthly SIP: Which Wins' in terms of returns. Curious to know which strategy comes out on top?

Continue following DSIJ—your trusted source for insightful stories aimed at helping you make smarter financial decisions and build a stronger future.

Shashikant Singh
Executive Editor

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