Jan 01, 1970 3 min read

Failed to Understand the Concept of SIP Investment? Here’s How It Works

Understand this concept to fetch the best returns from your SIP investments.
SIP investment was brought in for the ease of investors who have big dreams to be achieved but don't have the ability to pull the burden or the risk of a big amount in investments. And by time, it has fulfilled the dream of many people by multiplying their money manifolds.

Still, many are unable to understand the actual working of SIP due to which they face unnecessary hurdles. One needs to make a clear understanding of the concept of SIP investment to bring out the best rewards; else it will be a journey without knowing the route.

Let’s start it with a story to grab the best understanding of the concept of SIP investment:

There was a wrestler who got a challenge to lift a big cow with both his hands. He put all his efforts but failed to do so. Lifting up a cow is a task next to impossible, we all know that. He did not give up and promised to meet the same challenge at the same place after five years. He started practicing for it with a calf and used to lift it daily. By the time, the baby calf grew and turned into a big cow, and the person kept practicing the exercise of lifting it regularly. After the completion of five years, he gained the power to lift the cow with his hands because of his regular practice, and successfully won the challenge. In this story, he made a vision to achieve, a strategic plan, a commitment to the plan, and kept patience for the results, and at last, achieved his desired goal. The concept of SIP is also based on the same parameters and help in achieving big financial dreams through the systematic investments.

The main points to focus on for understanding the working of SIP investment include:

  1. Set a Definite Goal : Firstly, the investors need to set a goal which is to be achieved after a certain period of time. For example; own house, international holiday trip, relaxed retirement, wealth creation, etc. People have different financial objectives to be achieved in their life and SIP provides the best way to achieve those in the most efficient manner. The idea of SIP came into existence to allow easy investment rides for the investors who wish to reach a predefined objective. Why will one book a cab, if he does not have any destination to reach? The same goes in SIP, if you have a defined objective, you will find the best-suited scheme to achieve it.
  2. Make a Strategic Plan : In the story mentioned above, the wrestler chose to practice continuously with a calf keeping a strategy in mind that regular practice will allow him to lift the same calf when it will be a big cow in the future. Hence, it is imperative to draft a strategic plan to attain any success in life. To create wealth for the future financial needs, SIP provides you with the best way to initiate your investment for achieving the desired goal effectively and efficiently.
  3. Commitment to the Plan : Many times it happens with people that they make the best strategies but due to the lack of proper knowledge they quit the plan. If we take the example of the story mentioned above, it is quite obvious that the person might have faced any illness or injury in five years, but if he had quit the challenge due to those hurdles, he could not have achieved the success. Mutual fund SIP investment is also based on the similar commitments, one who does not quit the plan due to various market trends experience the best results on their investments.
  4. Keep Patience for the Best Results : SIP investments have the ability to grow the money manifolds, but it takes due time because of various other factors like market swings. Keeping patience for the right time is one of the most important ‘mantras’ of earning the best returns out of the SIP investments. After all, a seed needs years to grow into a tree, and then only it provides us with fruits. Similarly, your small instalments need time in accordance with your plan and objective to get accumulated into a big corpus.

Therefore, the one who can stay dedicated toward the commitment like the wrestler, one can achieve even the unbelievable targets easily. So, understand the main points on which you should be focused while riding toward the achievement of your financial goals. You can get the important investment tips on mutual funds on our portal MySIPonline to enhance your knowledge.

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