Discipline in Investments

In our previous edition, we spoke about how easy it is and how important it is to start your wealth creation journey. To take this further and how you can partially bring in more discipline and automate your investing.

We often say this; discipline in anything is the key to success.

How much do we really follow specially when it comes to our own self, may it be pertaining to our Health, personal life goals or may it be finance / investments.

I have been observing this since sometime that slowly people who are kind of beginners or freshers or who have been thinking since sometime and have taken there most important first step towards starting there wealth creating journey.

It’s important for a person to start their investment journey and then gradually when one gets on the train the ball gets rolling.

Best way is Mutual funds once started that too especially modes like SIP / STP...These modes of investments itself creates discipline...  To inch up further and add more solid approach towards increasing our investment amount gradually without us being much bothered periodically – STEP-UP SIP is the way to go.

How does step-up sip works? 

Basically while initiating your sip we need to opt for step-up sip which basically will lead to increase in your sip amount by a lumpsum amount or it can be increased by a specific % of your existing sip amount. Say for eg. You have an ongoing sip of rs.5000/- and you want to increase your sip amount from next year by 10% so from the next year the sip amount shall become 5500/- (5000 +10% = 5500). This shall automatically lead to an increase in the basic investment amount gradually and result of this over a longer period can be very beautiful. Also it is important to decide the amount which can be non hurting the cash flow and whatever is comfortable amount.

Small Illustration depicted below

Regular SIP

    §  SIP Amount: Rs.15,000

    §  Tenure of Investment: 20 years

    §  Expected rate of return (growth rate)%: 14% CAGR (Assumed)

Amount Invested	36 Lakhs
Corpus	1.76 Crores

 

With STEP-UP-SIP

    §  Initial SIP per month: Rs. 15,000

    §  Tenure of Investment: 20 years

    §  Step- up investment: 10% every year.

    §  Expected rate of return (growth rate)%: 14% CAGR (Assumed)

Amount Invested	1.03 Crore
Corpus	3.39 Crores

Disclaimer: The above calculations shown are for illustration performance only. Mutual fund investments are subject to market risk. Refer to the scheme related documents carefully.

Author: Mr. Bhavin Shah

Latin Manharlal Group