Systematic investment plan & the magic of compounding

  “The golden secret of earning from saving is not how much you invest, but how long you invest.” The early birds gets the worn is not just a part of the jungle folklore. Even the ‘early’ investor gets a lion’s share of the investment booty due to the magic of ‘compounding.’

         Akshay Patel a conscious investor started timely saving of Rs.10,000 per month in a Systematic Investment Plan (SIP), his friend Viral Vaghelia was too preoccupied with his business to find time for planning his investments. AKSHAY ‘s SIP has a track record of offering a 15% annualized return and thus he was calculated that he would became a ‘Crorepati’ reaping Rs.1.1 crores after 18 years of regular savings. VIRAL wakes up 4 year late and also wants to catch up with his friend. However, he is just unable to believe how much his delayed decision is going to cost him when he is told that to earn the same target amount of Rs.1.1 crores in the remaining 14 year, he would be required to invest double the saving amount i.e. Rs.20,000 per month.

Time & Timing is the Key to Prosperous Investment

         The moral of the above story: “The golden secret of earning from saving is not how you invest, but how long you invest.” The early bid gets the worm is not just a port of the jungle folklore. Even the ‘early’ investor gets a lion’s share of the investment booty due to magic of ‘compounding’. Time and Timing is the key to prosperous investment.

         SIP has grown to become a popular investment mode, since it offers the following strategic advantages.

• Inculcates a disciplined investment approach, encouraging the investor to regularly invest small amounts, instead of postponing investments and then sporadically investing large amounts.

•  Allows averaging of cost per unit, talking best advantage of market volatility, since an investor       effectively buys more units when princes are low and less when prices are high.

• While considering investment in SIPs offered by Mutual Funds, it would be even more worthwhile to look at SIPs of Equity Linked Saving Schemes (ELSS). ELSS offers a golden opportunity to save income-tax of up to Rs.30,900 through a straight deduction under Section 80C up to Rs. 1,00,000.

   

         THE MAGIC OF SUSTAINED SAVING

  

It’s not just how much, but how long you invest that matters!