Why Do SIPs work all the Time


                    If you know, its that simple and yet do not do it, It feels bad. A lot of this is so true for life and all the more in financial life where people think that one has to jump hoops after hoops, do some very complex thing like Options Trading, invest in Crypto, NFT or have "contacts" that can make you rich over night while each of us know that consistently saving is more than enough to make you wealthy beyond your imaginations! One such simple tool that helps you save consitently is your humble SIP. Yet people doubt its abiltity to create wealth and complicate things with "What will happen If" questions. 

                    We decided to write about How SIP creates wealth even if the asset price does not go "much" above the Price you did your 1st investment through your favourite asset- "Gold"

A Chart showing the same - 

As you can see, the price of gold for 7 years did not move much. From INR3100 in 2012 to INR3400 in 2019 with an absolute gain of INR300 for a 7 Year period translating to INR50 appreciation/year (6*50=300) which is on an average 1.6% gain every year. Mind you nobody got uncomfortable with Gold, never doubted it, sold it off or created panic. As far as I remember , World was as perfect then as it is today. My guess is most of us bought whatever little we would buy and just for ease of maths lets say you kept buying gold for INR 3,100 (Price of 1 Gm Gold in Sep 2012) each month

Even though the absolute Price of Gold grew by only 1.6% every year because we were consistently disciplined in buying gold every month, we made a handsome 7.5% IRR which is quite good return over a 7 year Period though the asset price never went up significantly. Thats the power of SIP that is "Consistent Disciplined Buying"


Fast forward to 2024, If we had continued to invest in Gold even though the prices shorlt up due to Covid, we still would have managed to achieve a XIRR of 10.9% which is a handsome return keeping in mind the peace Gold brings with it. Mind you a 60K investment for a 8 Year period would fetch you a corpus of 60 lacs at that rate of IRR. (The Invested value would be 43.2 lacs) 


Now the thing we would like to draw your attention to is  - "The simple secret to wealth creation is saving Consistently and in a disciplined way" and the humble SIP is GOAT tool of both consistency and Discipline. But we still see a lot of people having doubts If "SIP" can actually work if X happens  or Y happens. Don't worry we just saw with the example of Gold that did not perform for 7 straight years but still gave you a Saving bank type of returns and when it started moving up, gave double Saving bank returns! 

So if you are already not doing a SIP, stop worrying and start a SIP with Droplet Wealth.

And if you are already doing a SIP but worried about the fund you chose or did not think about Asset Allocation, then too stop worrying and review your SIPs with Droplet Wealth. 

But most importantly, Keep in Mind - SIP works! (as long as you don't fiddle with it) 

For any financial Planning queries, Please contact Droplet Wealth at invest@dropletwealth.com.

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