MumbaiEven without daily trading, it is possible to accumulate a corpus of Rs 1 crore with a monthly investment of Rs 10,000. A Systematic Investment Plan (SIP) is the most practical way to accomplish this goal. According to experts, accumulating Rs 1 crore in 20-25 years with a Rs 10,000 monthly SIP is realistic and easily achievable for an average retail investor with a disciplined approach.
History suggests that equity is the only asset class that outperforms over the long run. According to Prasenjit Paul, an equity analyst at Paul Asset and the fund manager of 129 Wealth Fund, the Nifty 50 index has generated around 14 per cent average annualised returns over the last 20-25 years.
"Thus, a monthly SIP of 10,000 in a Nifty 50 index fund can realistically generate 1 crore over 20-25 years," Paul said.
What does SIP in Nifty 50 Index mean?SIP in a Nifty 50 index fund means investing in the top 50 companies in India, which provides proper diversification without the need for too many funds in the portfolio. Moreover, since an index fund is a passive fund, it is the lowest-cost option and mirrors the overall economic growth of India over the long run.
SIP in a Nifty 50 index fund means investing in the top 50 companies in India, which provides proper diversification without the need for too many funds in the portfolio. Moreover, since an index fund is a passive fund, it is the lowest-cost option and mirrors the overall economic growth of India over the long run."Recency bias is the biggest barrier to long-term compounding. Investors frequently estimate future earning potential using the returns from the prior year. As a result, a poor year frequently discourages them from carrying out SIPs, while a successful year causes excessive excitement that interferes with a methodical approach. For similar reasons, investors often become greedy and invest in the best-performing funds of previous years, assuming the continuation of outperformance. However, this results in frequent switching and over-diversification, which ultimately affects long-term returns," Paul added.
Daily portfolio value tracking is the primary cause of all these errors. The likelihood of straying from a disciplined approach increases with the amount of daily ups and downs you follow. Because real estate is not valued every day, it is easier to hold onto it for five to ten years or longer. In a similar vein, avoiding daily price volatility tracking is the best way to maintain discipline.
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