How a Systematic Investment Plan Can Help You Increase Your Wealth

How a Systematic Investment Plan Can Help You Increase Your Wealth

How Systematic Investment Plan Helps Increase Your Wealth

In today’s time, we all are well aware of how concerned we are relating to the overall growth of the amount of wealth available to us. Because wealth is also a kind of asset that is capable of working on your behalf when put to use and can make you earn a good amount of returns that supplement your money within a period and this mechanism is popularly termed an ‘investment’.

There are genuinely many ways and methodologies you can choose to invest your money as per your own will, return analysis, time value of money, etc. So, we are going to discuss one such popular way to meet all your financial desires through a worthy investment plan.

Understanding Systematic Investment Plan

As its name suggests a SIP i.e Systematic Investment Plan refers to a quite systematic plan curated for keen investors to contribute a fixed sum of money in regular intervals which is usually monthly into any kind of SIP mutual fund or other investment policy in order to maximize their wealth over a period of time.

The SIP has gained enormous popularity and application by a lot of investors nowadays due to its non-complex and easy-to-pay instalment structure. It has been seen as a productive policy in terms of generating additional wealth after investing consistently through it.

Hence, investing in SIP can be a worthy platform for both non-experienced as well as experienced investors as the amount of capital to be contributed can be quite less in amount as well for initial trial satisfaction.

Advantages of SIP for wealth accumulation

1. Compound growth

Compound growth

Compounding refers to a cyclic procedure that ultimately increases your level of wealth. The basic cycle involved in compounding can be best understood through a numerical example.

Example: If you start by investing a sum of Rs 100 through a systematic investment plan accompanied with a financial year return @10% then, in the first year amount received by you in a lump sum will be:

Amount received at the end of 1st financial year= 100 + (10% of 100)
= 100 + 10 = Rs. 110

Now, at the end of 2nd financial year the 10% return rate will be levied on Rs. 110 rather than Rs. 100 and the final amount received will be:

Amount received at the end of 2nd year= 110 + (10% of 110) = 110 + 11 = Rs. 121.

Hence, this cycle occurs multiple times after each financial year in such a way that it’s important for you to be an early investor to reap the maximum benefit.

2. Rupee cost

One of the major concerns of investors while opting for any investment plan is the way by which they can deal with the fluctuations happening in the market, on a regular basis. The volatile happenings in the market, in which rates change constantly, put an investor in an unexplainable situation with respect to the amount of money they should invest and at what time keeping these situations in mind.

But, opting for a best SIP to invest in can put you out of such a situation as you don’t need to analyse market fluctuations much and need to pay a fixed sum of money every month or whichever period is given.

The phenomenon of regularly investing can offer you steady growth over time while buying more units when the price is lower and lesser units when the price is higher is termed as the rupee cost averaging effect.

Easy entry to financial markets

It’s quite practical to conclude how interesting it seems to be the one involved in the financial market transactions and doing investment seems it’s even more complex in execution and is full of uncertainties due to dynamic market fluctuations.

So, what should a newcomer who wants to enter into the financial markets do?

The solution to this question is simply investing in the SIPs as they are capable of providing you with an easy route to the financial market with a number of perks that will keep you on an efficient end. Some of these are:

1. Lesser capital investment is required making it favorable for taking initial risk.

2. Easy instalment paying method making it a budget-friendly choice.

3. Free from complex market fluctuations through its automatic operation route.

4. Can be done and tracked online with ease.

5. Gives you a good opportunity to learn and earn.

So, if you are also looking forward to investing your money in the financial market then don’t think twice before choosing this route, especially for initial experience.

Disciplined Investing and goal achievement

All the investors who are experienced or the budding ones are very well-aware of how much a disciplined approach and clear sense of goal achievement is important while carrying out any particular investment to reap fruitful end results. Investing in an even mutual fund SIP will ensure a disciplined cycle of execution and a clarified aim be it tangible for the goal achievement in the following ways:

1. Consistent payment of the sum every month through automatic debiting of that amount.

2. No hindrance is caused in the discipline due to cut off from the factors influencing market fluctuations.

3. SIP can be tactically curated for the purchase of any tangible asset like a house or vehicle as an end goal as well.

4. Helps the investors to reap long-term benefits of their consistent investments.

5. Enables increased accountability among the investors to enhance their knowledge.

So, if you are looking for a rational mix of discipline and goal achievement in the investment genre to grow even as an individual investor then do opt for SIP.

Diversification and risk management

Looking at yet another dual important aspect of investing i.e. diversification and risk management it is very important to understand that investing all your money in just one kind of company or sector could be a great mistake as your total returns depend on that now and any kind of loss can turn out to be of a huge impact.

To nullify the impact of loss incurred from any particular company with the profit earned by another company at the same time through diversification will reduce your risk efficiently and will turn out to be a clever move.

By investing in the SIP mutual funds you can unlock the doors of investing in different sectors and companies even regardless of the geographical factor making it an easy way to diversify your portfolio to reduce risk and increase overall chances of earning good returns.

Flexibility and Customization

Being an investor is quite a stressful task as you are always curious about the number of returns you will get, market fluctuations, compounding rate over the years, etc. Hence, having a perk of flexibility as well as customization could be something they can actually enjoy.

Choosing the best SIP to invest in will be capable of providing you with these features that will accompany your wealth-making mechanism with a touch of versatility to make regular investments a cakewalk for you. It’s evident from the following pointers:

1. The period of time for which you want to make your investment can be tailored.

2. Choose among different sectors and companies to invest your funds.

3. Temporarily pausing your investing operations without cancelling can also be done.

4. The amounts to be invested can be customized as per your capability.

5. You can avail the benefit of a top-up option where you can pay smaller amounts initially and larger amounts later while earning through returns as well.

Hence, if the matter of flexibility and customization enters the arena the SIPs take a point.

Steps to start a SIP

Now, after undergoing all the relevant information stated above if you are looking forward to trying your own hand at investing in SIP then, the basic steps you need to follow are as follows:

1. Determine your financial objectives. Basically, you should know your end motive for earning the returns.

2. Do analyze the risk associated with each type of your SIP investment so that you allocate your funds accordingly.

3. Finally, after analysing the risk choose the company or sector where you finally wish to invest but after looking at previous performance records, fluctuations, reviews, etc.

4. Go with an investment amount that you are comfortable with especially while making an initial investment as later you can even opt for a top-up option.

5. To ensure a consistent cycle of investment choose your prospective investment period among monthly, quarterly, semi-annually, and annually.

6. Do your KYC ( Know Your Customer) formalities and book a date from when you want to start your SIP investment journey.

7. After downloading the SIP web application form, fill it out properly and submit it.

8. Provide all the relevant bank details and kick-start your investing activities.

9. Don’t forget to analyze the final performance of your SIPs during some pre-analyzed intervals to see if they are actually meeting your wealth expansion strategy.

10. In the end, believe in your investment and stay disciplined with it over the time period.


Hence, if you are also a rational person who is determined to stick to ways to reap long-term benefits through worthy investments then start with your systematic investment plan today itself as the earlier you start the more you earn in terms of returns.

I hope this article was helpful and wish you the best of luck with your financial aspirations.

CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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