Become crorepati with just Rs 500 - How a small investment can work wonders!
SIP contribution have jumped by 23% in last one year and 1.9 times in past two years in mutual fund industry.
The mutual fund industry saw a jump of 4.2 per cent in April with inflows at Rs 24.8 trillion. This was led by inflows in income and debt oriented schemes. Interestingly, equity inflows including ELSS and Arbitrage witnessed lackluster demand as net inflows came at Rs 58 billion in April, compared to Rs 78 billion previous month. According to Motilal Oswal, April flows cannot be compared to the previous month, as reported April data is in the new format prescribed by the SEBI with focus on regrouped and reclassified schemes. The Systematic Investment Plans (SIPs) have garnered inflows of Rs 82.4 billion, rising by a massive 23.1% on yearly basis. As per Motilal, SIP contribution have jumped by 23% in last one year and 1.9 times in past two years. SIPs have gained popularity, and with little investments can actually make many investors rich.
Data compiled by Motilal revealed that, among top 20-fund the highest month-on-month increase was seen in Mirae Asset Mutual Fund (+3.9%), Canara Robeco Mutual Fund (+3.6%), AXIS Mutual Fund (+3.1%), Invesco Mutual Fund (+1.4%) and SBI Mutual Fund (+1.1%).
But if you look at the chart, on yearly basis, returns given by these mutual funds have ranged from 2% to a whopping 94%. Top mutual funds that gave hefty returns in a year were Invesco Mutual Fund with 94% jump, followed by Mirae Asset Mutual Fund with 56.7%, Tata Mutual Fund with 40.9%, AXIS Mutual Fund with 39.7%, SBI Mutual Fund with 35.3% and Kotak Mahindra Mutual Fund with 30%.
(Image source: Motilal Oswal)
This indicates the promising growth in mutual funds. But did you know, with just little investment in SIP you can become crorepati as well. All you need a minimum investment of Rs 500.
Earlier, expert at IIFL Securities say, “Equity is the best way to create wealth in long term vs. other asset classes like debt, gold, real estate, etc., since historically it has been seen that equity based investments have given inflation-beating returns over long term despite short term volatilities. Equity mutual fund is a right way for investors to invest in equity market who do not have time and/or knowledge to understand the equity market.”
They added, “The Indian mutual fund industry is well regulated, transparent and mature. Instead of timing the market, investors can regularly invest in the market and can reap the benefit of ‘Rupee Cost Averaging’ via SIP.”
For example, if you invest in SIP with Rs 500 every month for a investment period of 35 years at an expected return of 18%. Your gains in SIP at end of 35 years of maturity will be Rs 1.8 crores including your principal investment of just Rs 2.1 lakhs.
(Image Source: SIP Calculator)
Even if you do not plan to keep your SIP for 35 years, you can still gain massive. For instance, if SIP kept for 20 years, your return would be Rs 11.7 lakhs. While if kept for 25 years your return will be Rs 29.1 lakh and at 30 years maturity you will earn Rs 71.6 lakhs.
There is a saying with higher risk comes higher returns and this is surely a true fact when it comes to having an appetite for equities. But not all have massive funds, and not all are capable of taking heavy risk.
For these people, Systematic Investment Plan (SIP) comes as best pick. The best way to describe this investment mechanism is - little drops of water make the ocean. SIP is the most basic, flexible and easy way of earning big money for your hard-earned investment.
Mutual Fund SIP is at currently at a booming stage, and is seen as the most convenient, hassle-free and smartest way of investment. One can invest a certain amount in SIP at regular intervals namely weekly, monthly or quarterly.
SIP is an easy step and also ensures discipline in your savings. All you have to do is open an SIP account with a financial institution, and link it with your bank account. Depending upon your investment strategy, money will automatically get deducted from your bank account on weekly, monthly or quarterly basis.
There are four types of SIP.
Top-up SIP - Under this, your investment increases periodically. Such implicates that you can make your SIP investment by contributing in well-performing mutual fund schemes at certain intervals. One can also increase their investment amount, as their income increases.
Flexible SIP - As the name suggest, this allows you to increase and decrease your investment amount as per the cash flow you have. By doing this, you can skip one or more payments during the time of cash crunch. Also, when you have hefty money in your hand like bonus or additional income, you can likewise increase your investment amount.
Perpetual SIP - Usually, SIP has a fixed tenure like 1 year, 3 year or 5 years. However, by investing perpetual SIP, you do not have to mention the end date in your mandate and let your investment increase. Such helps in redeeming your fund whenever needed, or when you have achieved your financial goals.
Trigger SIP - This one for investors with limited knowledge of the financial market. One is allowed to set NAV, index level, SIP start date or event, etc.