The Power of Compounding with SIP
Creating wealth is rarely about making a single lucky investment; it is about discipline, patience, and the mathematical miracle known as compounding. A Systematic Investment Plan (SIP) is one of the most effective tools for long-term wealth generation. Whether planning for retirement, education, or a dream home, SIP is your path to financial freedom.
What is a SIP?
SIP is not an investment product itself, but a method of investing in mutual funds. Instead of investing a large lump sum, you commit to a fixed amount (e.g., ₹5,000) at regular intervals. This instills financial discipline and leverages Rupee Cost Averaging, protecting you from market volatility.
SIP vs. Lumpsum
- Accessibility: Start with as little as ₹500/month.
- Reduced Risk: You buy more units when markets are down and fewer when up, averaging out the cost.
- Flexibility: Pause, increase, or stop anytime without penalties.
Frequently Asked Questions
Equity mutual funds typically deliver 12-15% over the long term (10+ years).
Short term, yes. But over 5-7 years, equity funds rarely result in loss due to market recovery.
Yes, use a "Step-up SIP" to increase investment as your income grows.
Your SIP won't cancel. The bank may charge a penalty, but investment continues next month.
LTCG above ₹1.25 Lakh is taxed at 12.5%. ELSS funds offer tax benefits under 80C.
Yes for most funds. ELSS has a 3-year lock-in. Exit loads may apply before 1 year.
Any date works. Pick a date soon after your salary day to ensure discipline.
No, this shows nominal value. Real value will be lower due to inflation.
For long term (>5 years), SIP (12%) usually beats FD (6-7%) significantly.
You can stop anytime via your bank or app. Your invested money keeps growing.