This is my first blog of 2021. I realise that I have not written for almost a year! It may take you just 3 minutes to read this blog, but I believe it is one of the most important one that I have ever written. Welcome to a new concept in SIP investing, “Forever SIP”.
Systematic Investment Plan (SIP), as we all know, is a simple way to invest in the mutual funds. All we do is set aside some amount every month and keep investing in mutual funds with the objective of achieving our long term financial goals. I have been the biggest proponent and fan of SIP investing. It made a big difference in my life and helped me achieve all my financial goals. I can easily attribute all my financial success to this concept. So, why a new concept and why have I titled it “Forever SIP”?
Purpose of SIP Investing
When I started investing, the idea of SIP investing was to generate wealth and accomplish my financial goals of owning a home, educating my children and saving for retirement. Now that it’s all done, isn’t it logical to discontinue all my SIPs?
As I was mulling over my decision to discontinue SIPs, I came across this beautiful visual.
If I discontinued my SIP, I would hitting at the very roots of my success! How could I ever do ever do that? So the decision was made, I will continue with SIP investing till I am alive! And the idea of “Forever SIP” was born!
The Powerful impact of “Forever SIP”?
I am 56 years now and with life expectancy going up I should be expecting to live through till age 75 (at least in theory!) Interestingly a SIP of Rs 10,000 per month invested for 20 years @ 12% per annum can potentially grow to Rs 1,00,00,000 (One Crore). And if I lived till Age 85, my savings could compound for 30 years and this would translate to Rs 3,50,00,000 (Three Crores Fifty Lacs)! This is no magic, its simply the power of compounding!
Next, I wondered what would happen if I could save Rs 50,000 every month. The maths is not difficult. With the same set of assumptions (Save for 30 years and generate a return of 12% per annum), I would be sitting on a wealth of Rs 17,50,00,000 (Seventeen Crore Fifty lacs)! I was astounded with the numbers!
My thoughts were running wild and I was imagining all possible scenarios where I could apply this concept.
So, what would happen if my kids set up a “Forever SIP”? WHAT IF they could carve out a small and insignificant portion of their SIP and continue it forever? They could do the Forever SIP for 60 years! Yeah, that’s right 60 years! Even if they saved just Rs 10,000 every month, they would have generated a wealth of Rs 130,00,00,000 (One hundred Thirty Crores). WOW!
The Power of Compounding in all its glory!
Here is a table that shows the power of compounding in its true glory! No one know what returns you would generate from your investments, but we do know that saving regularly for a long period of time can help you build inter-generational wealth!
So, how can you implement this concept?
It is very easy to set up a Forever SIP. Start with a small amount. Treat it like a core expenditure. Imagine it’s spent and you cannot get it back. And you shall commit to doing it throughout your life!
Sit back! Relax! Let the power of forever SIP do its magic for you!
1 thought on “The powerful impact of a Forever SIP!”
Simple and powerful!
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