The Power of SIP

In the hustle and bustle of our daily lives, the idea of building wealth often seems daunting, reserved only for the financially savvy or the exceptionally lucky. At 32, Anshika Gupta believed this to be true – after all, she had spent 10 years as an architect, with nothing much to show in terms of savings or investments. However, the truth is, wealth creation is within reach for anyone willing to take small, consistent steps, as Anshika realised after a much-needed conversation with her mentor. [EasyDNNnews:PaidContentStart]

While it was true that she was living in Mumbai, one of the most expensive cities in India, and had unavoidable expenses like rent, groceries and travel costs, there was a powerful tool in the arsenal of wealth creation that she could leverage – the systematic investment plan (SIP), coupled with its lesser-known yet highly effective companion – the SIP top-up feature, to build an enviable corpus. 

Understanding the SIP approach
At its core, a SIP is a disciplined approach to investing where an individual invests a fixed amount at regular intervals, typically monthly. This method eliminates the need for timing the market, as investments are made consistently, regardless of market fluctuations. The beauty of SIP lies in its simplicity – it is like putting aside a portion of your income for your future self. By investing a fixed amount regularly, you benefit from the concept of rupee cost averaging. When the market is down, your fixed investment buys more units, and when the market is up, it buys fewer units. Over time, this smoothens out the fluctuations in the market, potentially reducing the overall risk of your investment. 

The Role of Patience
Patience is the unsung hero of wealth creation, especially when opting for the SIP route. While the allure of quick gains may tempt some, true wealth is often built gradually, through steady and disciplined investing. SIP instils this patience by encouraging investors to stay the course, even during turbulent market conditions, since acquiring sustainable wealth is about playing the long game and trusting in the power of compounding, a feature which has played an integral role in building Warren Buffett’s enormous wealth. 

Introducing the SIP Top-Up Feature While SIP lays the foundation for wealth creation, the SIP topup feature acts as a turbo-charger, accelerating your journey towards financial freedom. This feature allows investors to increase their SIP investment amount periodically, either by a fixed amount or a certain percentage, depending on their financial condition. The feature empowers investors to capitalise on market opportunities effectively – during periods of economic downturns or market corrections, when asset prices may be lower, increasing your SIP investment through the topup feature can yield greater returns in the long run. 

One of the most appealing aspects of SIP with the top-up feature is its flexibility – investors have the freedom to adjust the frequency and amount of their top-up contributions based on their financial goals and market conditions, ensuring that their investment strategy remains aligned with evolving needs and circumstances. For instance, when Anshika received a bonus for completing a major project, she chose to allocate a large chunk of the same as an SIP top-up, thereby boosting her investment. 

Assessing the Power of SIP
Top-Up Let us consider a hypothetical scenario: Suppose you start a SIP with an initial investment of ₹5,000 per month. Over time, as your income increases or you identify additional funds for investment, you decide to utilise the SIP top-up feature to increase your monthly contribution by 10 per cent every year. In the first year, your SIP investment amounts to ₹5,000 per month. However, in the second year, with the 10 per cent top-up, your monthly investment increases to ₹5,500 and by the fifth year, your monthly investment has grown to ₹7,320.50, thus boosting your investment in a steady manner. 

Over the years, this amount will compound significantly to offer you an enviable nest egg, without taxing your current financial scenario. As Anshika realised through her own experience, investors can gradually grow their wealth over time, by taking small, incremental steps and harnessing the power of compounding. Remember, wealth creation is not a sprint – it is a marathon. So, start small, stay consistent, and watch your wealth grow, one step at a time. 

Puneet Oberoi CFP
Director, Finwise Services Pvt. Ltd 

The writer is Director, Finwise Services Pvt. Ltd
■ Email : [email protected] ■ Website : www.finadwise.com

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