In the last two decades, the Bombay Stock Exchange (BSE) gave 12% annualized returns. In comparison, gold delivered only 6% annualized returns. Currently, the bank fixed deposits are between 7% and 8% for a ten-year period.
Traditional investment avenues often do not deliver higher returns that enable you to achieve your dreams. Investing in direct equities is risky and requires technical knowledge. Mutual funds offer an investment avenue that not only mitigates risks but also allows capital appreciation over the long-term.
You do not need a huge amount to start investing in mutual funds if you have a proper financial plan. Even as little as INR 500 per month early in your career may go a long way to help you achieve your dreams. Here are three success stories on how systematic investments in mutual funds have helped investors achieve their financial goals.
- Become a crorepati
Like most others, Amit a 21-year old sales executive wanted to earn rewards without risks through his investments. To avoid the risks of equities and earn better returns than the fixed-income securities, he opted for a Systematic Investment Plan (SIP). His goal is to become a crorepati when he is 60 years old.
To achieve this objective, he started a systematic plan of INR 5000 in a fund that gave an average return of 10%. Amit continued his investment until he retired. This allowed him to build a corpus of INR 3.16 crore at the age of 60.
- Wealth creation
Aditya and Madhuri had been investing INR 10000 per month for over 12 years. They wanted to ensure they had sufficient funds to meet their retirement goals and ensure their children’s higher education. They took help of a financial planning expert to determine the ideal investment amount and route.
Based on the calculations done by their financial planner, they needed to save at least INR 50000 per month and continue increasing this amount by 10% per year. Initially, Aditya and Madhuri had difficulties in reaching their target investment amount. However, they reduced their monthly expenses and managed to increase their SIP investment to INR 35000. Over time, as their incomes increased, they now invest INR 50000 per month in mutual funds through the systematic plan route. In a short period of just five years, their portfolio has increased from INR 5 lakh to INR 55 lakh enabling them to build wealth.
- Financial freedom
Abhijit invested some part of his income from the time he started working. With his first paycheck, he started investing through a SIP. He has never stopped investing while gradually enhancing the amount as his income increased. From a meagre INR 2000 per month investment, today he invests INR 18500 monthly. His regular saving habit has enabled him to create a portfolio of INR 25 lakh.
Encouraged by his success, he wants to increase his monthly investment by an additional INR 15000. His financial goals include building a retirement corpus, allowing his children to pursue studies and their wedding. Because he started investing early, he already has a good corpus.
He is only 33 years that gives him several more years of work life. He is committed to continuing investing through SIPs to achieve his goals and attain financial freedom.
These are just some success stories of people who have achieved their goals through systematic investments. You could also create your own success story by investing in SIPs. Systematic plans have some excellent benefits as discussed below:
- Rupee cost averaging
During market dips, systematic plans allow you to accumulate more units and vice versa. This reduces your average cost of investment.
- Power of compounding
When you invest in mutual funds through systematic plans, you are able to benefit from the compounding effect. This simply means that the investment earns returns, which are reinvested to earn further income.
- Investment discipline
Systematic plans encourage you to invest smaller amounts at regular intervals. This inculcates investment discipline without creating any financial distress.
Simply investing in systematic plans does not assure you sure-shot success. To ensure you achieve your financial goals, here are three financial planning.
- Remain patient
Equity markets are volatile and even you invest in equity funds, your returns are related to the market conditions. Over the years, the stock exchange has gone through several phases where the markets have crashed or peaked. It is important that you remain patient during these turbulent times and stick to their investment plans.
- Do not time the market
Systematic plans have an inbuilt mechanism where you do not need to time the market to maximize their returns. Nonetheless, you may be tempted to exit your investments when you see the market rise and vice versa. However, it is recommended that you do not try to time the market and rather spend time in the market to earn higher returns.
- Monitor the portfolio
Mutual funds diversify the investment portfolio. However, it is important to regularly monitor and track their performance. This enables you to make any modifications that may be required under changed circumstances.
