Mutual Fund SIP

Mutual Fund Basics | Did you know that mutual fund is a very good mode of investment for those who are less educated about the tools of investment or have less time or money to spend on investment. In mutual, investor can start investment with minimum amount of Rs. 500 every month which is very nominal amount. 

If you are also thinking to invest in mutual fund this is for you. 

Let us move ahead with mutual fund basics now.

What is Mutual Fund?

It is like you give your money to a person who buys goods and services on your behalf. In the same manner, when you don’t have expertise in investing in the stock exchanges, you can give your money to Mutual fund and on your behalf, the mutual fund will invest your money in the stock market in such manner that your return is higher at a lower risk. 

What is SIP?

It is a disciplined approach to period wise investing. For example, you can invest either monthly, quarterly, or yearly. SIP investment develops the habit of savings for future and the easiest and best way to save regularly money with discipline is to make your Salary Day as your SIP date.

Why you should invest in SIP?

In spite of being a disciplined approach to investments using saved money, SIP investment also provides other advantages. Two of which are – Rupee-Cost Averaging and Power of Compounding.

Rupee-Cost Averaging

Under this, investors get more benefit in the form of more units when NAV falls down because of market volatility. 

Power of Compounding

Compound interest is known as the eighth wonder of the world by noted scientist Albert Einstein. The rule of compounding is very simple, the earlier you start the more you benefit. It means your each rupee of money keep increasing with compound effect. 

To understand compounding, let us assume you have a wheat grain. Suppose on 1st day, you have 1 wheat grain. If we assume that the wheat grain will double each next day, on 2nd day, you will have 2 wheat grain, on third day 4 grain, and the process will keep repeating. The accumulation of wheat grain shall be in the manner as give below and you will surprised having seen the number of wheat grains. After 24 days, the number of wheat grain shall increase to 83,88,608. 

This is the result of compounding which is also possible in case of Mutual fund SIP because in this investment, your return is compounded return. The more time it takes, the more return you will get.




Based on above result we can conclude that a regular SIP of  mutual fund can compound your money and help you create wealth.

How much you need to invest monthly in SIP to be a Crorepati?

Suppose your period in which you want to achieve your goal is 30 years. Your goal is Rs. 1 Cr. Expected Rate of return is 15%.

Using SIP calculator, you would surprisingly find that you need to invest the only approx. Rs. 1500 per month and you will be able to achieve your goal.


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