How can SIP help the Middle Class overtake the Upper Middle Class ??
To find out read on…..
What a Lumpsum and SIP investor should hope for in the medium term of 3 to 5 years
A Lumpsum Investor should wish for the market to go up
An SIP Investor you should hope for the Market to either go down or stay where it is
Let’s say that a lumpsum investor buys 12 units of a fund at NAV of Rs 100 per unit
He thus invests Rs 1200 in the beginning of the year
If NAV goes up by 10% his investment value after one year will be Rs 1320 for 12 units of investment
He will be happy
But if the NAV remains the same, then his investment value would be Rs 1200 for 12 units of investment
Now let us consider an SIP investor who invests Rs 100 per month
Now consider that the NAV does not rise in 12 months
In this case the SIP investor at the end of first year will have invested Rs 1200 & he too would have 12 units of investment
Thus SIPs help people with less money who can’t invest in one single go to build wealth just like the rich folks who had all the money to invest in one go
Now let’s assume the price per unit dropped to Rs 5 after the first month
In this case Rs 100 would buy 2 units every month for the SIP investor
So in 12 months the SIP investor would have 23 units by paying the same Rs 1200
( 23 units = 1st month 1 unit & balance 11 months 2 units each = 22 units)
In this case the SIP investor will have nearly twice the number of units as compared to the Lumpsum Investor
This awesome opportunity can never be offered by FDs, Debt Funds etc.
SIPs in Equity Funds provide the unique opportunity to investors to benefit from their lack of funds at one go
This is democratisation of SIP investing
Giving both the haves and have nots equal opportunities
Therefore as an SIP investor you should pray hard that thr markets remain range bound or correct during thr first 5 years of investing
If this wers to happen, the SIP investor would have an advantage over a lumpsum investor and the rich and not so rich would create the same wealth over a period of time
This is just a specific illustration to show thst range bound markets and market corrections are a boon for SIP investors
So SIP investors discontinuing after 3 to 5 years of investing is perhaps foolishness of the highest order
It is like doing all thr hard work ans quitting just when the fortunes where most likely to turn around.