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Sips and long term investing

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Title: Sips and long term investing


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Systematic Investment Plans (SIPs) Averaging
out Markets and Long Term Returns
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Systematic Investment Plans (SIPs)
SIP is a long term investment method that
involves investing a fixed sum of money at fixed
periods of time (Monthly/ Quarterly) in Mutual
Funds Scheme at the prevailing Net Asset Value.
(NAV)
  • Why invest in SIPs?
  • Builds Investment Discipline Creates a habit of
    regular savings
  • Affordable Convenient Allows for early
    investments in small amounts
  • Helps in compounding your wealth
  • Safegurads against market volatality through
    Rupee Cost Averaging
  • Safeguards against inflation as long term returns
    from equity is generally higher than average
    inflation rate

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The Power of Compounding Rupee Cost Averaging
Illustration 1 Rs 1,000 invested every month for
30 years would make your investment at
Rs.3,60,000. This amount may not be available
with you one time but can be invested through
small amounts over a period of time. Small
amounts invested regularly can grow into a
substantial lumpsum.     This
illustration shows how the Power of Compounding
and Rupee Cost Averaging helps an amount of
Rs.3.6 Lacs invested in small amounts over a
longer period of time, grow to Rs 62 lacs and Rs
23 Lacs depending on the annual rate of return of
15 and 10 respectively.
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Power of Compounding Benefits of Starting Early
If you were to invest Rs. 5,000 per month. The
table shows returns generated at different rates
when invested at different times in your life. We
have assumed that the investment matures at the
age of 60 years. Indicative rates of return of
14 12 have been taken for calculation of
returns
Return at 14
Age Total Investment and Tenure Amount at Maturity
25 Rs. 21,00,000/- (Rs.5000 x 420 months or 35 years) Rs. 4,42,21,463
30 Rs. 18,00,000/- (Rs. 5000 x 360 months or 30 years) Rs. 2,27,48,352
35 Rs. 15,00,000/- (Rs. 5000 x 300 months or 25 years) Rs. 1,15,95,892
Return at 12    
Age Total Investment Amount at Maturity
25 Rs. 21,00,000/- (Rs.5000 x 420 months or 35 years) Rs. 2,72,95,158
30 Rs. 18,00,000/- (Rs. 5000 x 360 months or 30 years) Rs. 1,52,60,066
35 Rs. 15,00,000/- (Rs. 5000 x 300 months or 25 years) Rs. 84,31,033
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Rupee Cost Averaging the Advantage
Month Amount NAV Units
1 100 10 10
2 100 9.4 10.64
3 100 10.6 9.43
Total 300 9.98 30.07
  • The purchase of Mutual Fund units at regular
    intervals ensures the averaging out of your
    investment.
  • Regular investments also safeguards against the
    volatality prevailing in the markets at that
    point of time
  • Rupee Cost Averaging reduces the average Cost of
    Purcahse to Rs. 9.98 per unit.
  • The illustrations given are indicative and
    should not be construed as investment advice

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Conclusion
  • SIPs follow the principle of Averageing your
    purchase and Compounding of Returns
  • SIPs are longer term investments and have a
    tendency of giving positive returns over a longer
    period of time
  • SIPs focus on consistent and continous
    investments Fixed amount for fixed period of
    time to safeguard from market volatality
  • SIPs Impart discipline in investing most needed
    quality for a long term wealth creation
  • SIPs are simple quick Hassle free investments
    with one time instruction
  • Law of Averaging at work Rupee Cost Averaging
    at its best
  • SIPs make investing more affordable

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