The Smartest Way to Build Wealth

The Smartest Way to Build Wealth - RRFinance.In We all have dreams but dreams can only be achieved if you work towards them. Building wealth is no different. A Systematic Investment Plan (SIP) helps you do just that. With SIP, you can invest a fixed amount in mutual funds step-by-step monthly or quarterly over a period of time, thereby averaging out your cost of investing and benefiting from the power of compounding. The power of compounding works best as you stay invested helping your money earn money over the years. After all, it is the time in the market and not timing the market that helps you create wealth for your dreams in life. So, dream more and achieve much more. Start investing through a SIP today and work towards achieving your dreams.

How SIP works?

SIP is a method of investing a fixed sum, regularly, in a mutual fund scheme. SIP allows one to buy units on a given date each month, so that one can implement a saving plan for themselves. The biggest advantage of SIP is that one need not time the market. In timing the market, one can miss the larger rally and may stay out while markets were doing well or may enter at a wrong time when either valuation have peaked or markets are on the verge of declining. Rather than timing the market, investing every month will ensure that one is invested at the high and the low, and make the best out of an opportunity that could be tough to predict in advance.

An investor can invest a pre-determined fixed amount in a scheme every month or quarterly, depending on his convenience through post-dated cheques or through ECS (auto-debit) facility. Investors need to fill up an Application form and SIP mandate form on which they need to indicate their choice for the SIP date (on which the amount will be invested). Subsequent SIPs will be auto-debited through a standing instruction given or post-dated cheques. The forms and cheques can be submitted to the office of the Mutual Fund / Investor ServiceCentre or nearest service centre of the Registrar & Transfer Agent. The amount is invested at the closing Net Asset Value (NAV) of the date of realisation of the cheque.

Best Tool to handle Volatility Volatility is inherent in equities as an asset class and short-term fluctuations are part of the course.

However, in the long term, equity is as good a wealth-builder as any. As a fact, since its inception in 1979, the S&P BSE Sensex has given CAGR (compound annual growth rate) returns of 17% and 15% in 10- and 15-year rolling periods, respectively. This has had a positive impact on equity funds, too. For instance, between February 2000 and February 2016, the index returned at a CAGR of 9.4%. During this period, an investment in equity mutual funds, represented by CRISIL-AMFI Equity Fund Performance Index, would have delivered a CAGR of 13%.

Go for SIP and invest for long periods One good way of dealing with the volatility is through systematic investment plans (SIPs), which obviate the need to time the market. By investing at regular intervals, investors benefit from rupee cost averaging – buy more units during a downturn (bear phase) and fewer units in an upturn (bull). Monthly

SIP in equity mutual funds – represented by Crisil-Amfi Equity Fund Performance Index – has returned 10% each over seven and ten years ended February 29, 2016.

Why SIP?     

Disciplined approach to investments No need to time the market Harness the power of two powerful Investment strategies: o Rupee Cost Averaging - Benefit from Volatility o Power of Compounding - Small investments create Big Kitty over time Lighter on the wallet Reap benefits of starting early