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In the realm of mutual fund investments, those who follow a steady approach over the years have a higher likelihood of achieving success compared to individuals swayed by daily market fluctuations.
Enthusiastic investors often make choices based on short-term market performance and immediate fund returns. Conversely, steadfast investors opt for a long-term commitment to a particular fund. These prudent individuals bypass chasing market highs or different fund performances, maintaining a consistent investment strategy over time. Their monthly income, whether from salary or alternate sources, steadily flows into their bank account, a portion of which they regularly allocate to their chosen fund.
Is this approach effective for these methodical investors? Recent analysis indicates that indeed it is. A recent report from FundsIndia’s monthly Wealth Conversations Report highlights that through continued SIP investments, these unassuming investors can potentially amass significant wealth over the years.
Based on calculations by FundsIndia, an investor contributing Rs 30,000 per month to a scheme yielding 12% annualized returns can achieve their initial Rs 50 lakh within 8 years. Remarkably, the subsequent Rs 50 lakh can be accumulated in a mere 4 years. The following Rs 50 lakh requires just 3 years. By the 20-year mark, this investor could be adding around Rs 50 lakh annually by consistently investing Rs 30,000 monthly, assuming a 12% annual return. This narrative emphasizes that even investors adopting an uneventful approach can cultivate a substantial corpus by persistently engaging in SIPs with a strong mutual fund scheme over the long haul.
While it’s important to acknowledge that investing in mutual funds carries inherent market risks, numerous schemes have outperformed bank deposits over the past two decades, yielding remarkable returns.
A strategically placed mutual fund SIP, guided by astute advice from a certified financial advisor, holds the potential to significantly enhance a portfolio over the long term. This outcome is attributed to the gradual and then exponential impact of the power of compounding.
