FRIENDS, NEVER STOP YOUR SIPs….BECOZ YOU WILL MISS WEALTH CREATION

My motto behind leaving a good job in a reputed company and taking up Financial planning profession is because I observed that most of us are good at earning money but very bad at managing & investing money. To put it bluntly, most of us are financially illiterate.

There are 2 reasons behind this:

  1. Financial education is not part of our education curriculum (I believe managing hard-earned money is as important as earning money; so a subject on financial education be added to our curriculum at school level itself).
  1. Since, we did not have any formal education in finance, we strongly believe that finance is a tough nut to crack, which is not the case.

So, all my posts are aimed at educating people on various aspects of Investment & Personal Finance. You may share my posts with friends, family, colleagues…if you think it will help them.

Now coming to the subject, in many of my previous posts I told that SIPs in Mutual funds are the best way to invest your money in the long run to achieve inflation beating returns.

Observe the following graph, which shows the NAV movement of ‘ICICI prudential value discovery fund’ over the past 10 years. NAV stands for Net asset value. NAV is the price of 1 unit of a mutual fund scheme. It is synonymous to share price. Since, mutual funds invest in a set of Shares, as the shares’ prices vary, NAV also varies.

Inline image 2
From the above graph,

1) You can see that the NAV value has increased from Rs. 10 to Rs. 120 in 10 years from 2005 to 2015,

2) which is an increase of 12 times in 10 yrs and it is equal to compounded annual returns of 28%, which is astounding.

3) If you have started an SIP of Rs. 8500 p.m in 2005 and continued till date, your current investment value would be Rs. 55 Lakh (Invested amount is only Rs. 10 L).

4) NAV remained constant over longer periods of time and it fell down to lower levels many times.

5) It means that you were buying the mutual fund units at cheaper NAV most of the time and when NAV starts increasing, the value of all the units you bought will also increase resulting in superior returns.

6) When the Stock market (Sensex/Nifty) falls or stays constant, it is a good time for investment and to continue your SIPs because you are getting units at cheaper prices.

7) So, never stop your SIPs. Just continue them, whatever happens in Stock market. You will create enormous wealth in the long-term.

Mr. Warren Buffet who generated 22% annual returns over the past 65 yrs has started with $10000 and today his net worth stands at $65 Billion.

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