By putting aside just Rs 500 every month in SIP, you could end up with Rs 1.25 lakh in 10 years, if you stick to the plan.
However, it’s important to remember that the stock market involves risk, so invest wisely and understand your own risk tolerance.
What is SIP?
SIP stands for Systematic Investment Plan. It’s a way of investing money regularly and consistently.
You decide on a small amount to invest, and you do it at regular intervals, usually every month.
SIP is a popular way to invest in stocks because it manages risk effectively, despite investing in the market.
But how does it turn your small investments into big returns? Let’s find out.
How does SIP work?
SIP works in two main ways – Rupee Cost Averaging and compounding.
It helps you avoid the ups and downs of the market by spreading out your investments over time.
This means you buy fewer units when the market is high and more units when it’s low.
Over time, this can lower your average cost per unit, reducing your risk and potentially increasing your returns.
Example
For instance, if you invest Rs 500 every month for 10 years through SIP, and you get an average return of 12 percent,
you could end up with around Rs 1.16 lakh. That’s a significant return on your investment of Rs 60,000.
