🤑 Sipping SIP

Elaborating why SIPs are the need of the hour in the current sideways market and how can you create wealth irrespective of the market conditions.

So there is a very interesting rule in Finance called the 15x15x15 rule where if you are saving Rs.15,000 every month and investing it in an investment that returns 15% every year, then in 15 years you will be holding 10 Million rupees in your account.

So what does this imply? The power of investing over a long time. Not only for a longer period but also systematically. That’s what I am gonna stress here - The Systematic Investment Planning aka SIP. Well, one rookie mistake that a lot of investors do is that - they worry about their investment returns and not the wealth creation. Wealth creation is the underlying matter that you need to focus on while investing and not on the returns.

WEALTH CREATION >>>

So how do you boil down on wealth creation rather than on returns? The simple answer is SIP.

SIPs have been touted as being the ideal way to invest and build wealth over the long term. Every investment expert talks about SIPs in such a way that investors might think they are the cure to all ills.

A few soundbites that can help you understand why SIPs are fantastic!

Market Volatility

If you are a new investor, firstly apologise to you, you are witnessing the worse market volatility and the market has been sideways for a couple of months. And who knows when all this gonna settle down? But at the same time, it is extremely difficult to time the market. Investors often worry about when and how much to invest. SIPs take this worry away. You don’t need to care about the ups and downs unless you are investing a lump sum.

Averaging your stocks

When you are investing via SIPs, you are investing a fixed amount on a fixed date (say 1st of every month). And if on that date, the stock price is less, you will have a higher number of shares. And vice versa. Hence your overall cost of acquisition gets averaged out. Averaging is an extremely magical trick that top investors play with their stocks in order to avoid their losses.

Buy more when the price is low, less when the price is high.

Power of Compounding

Compounding is the dopamine that you will enjoy while investing but the only catch here is the earlier you start, the higher the green you can see in your portfolio.

Lumpsum vs SIP

Well, a lot of investors jump in with a very huge lumpsum amount and this trend has been very common among retail investors which are very devastating to see. True that lumpsum can get you richer and higher returns but only when you invest it during a major and a decent dip followed by a very high bull run. Again it boils down to whether you can time the market. Hence it is better to stick with SIPs and most of the brokers are providing the SIP feature with very low minimum amounts. The great thing is that you can even delete or skip one month’s SIP if you are running on a tight budget. SIPs in mutual funds especially in index funds have been proven to provide ~15% returns every year.

Smallcase also helps you invest in SIPs based on a particular theme of stocks. You have the flexibility to choose the SIP amount. So, if you initially want to start with small SIP amounts in your invested Smallcase, you can do so. Once you get more comfortable, you can increase the SIP amount.

tl;dr → Work towards your financial goals systematically and with planning.