The Magic of Multiplying in SIP (Mutual Fund)
The Magic of Multiplying in SIP (Mutual Fund) Do you know why a tiny seed grows into a giant tree after years? Similarly, an initial amount of money invested at regular intervals in a mutual fund through SIP (Systematic Investment Plan) can become a sizeable amount of money over a certain period. It is due to the effect of compounding, which is also referred to as multiplying. What is SIP? SIP stands for Systematic Investment Plan. It is a mutual fund investment. You don't invest a bulk amount at a time. You invest a fixed amount every month. It's like saving your pocket money every month and watching it grow to a huge amount. How Does SIP Work? Let's understand that with a simple example. You deposit ₹500 every month in a piggy bank. In a year, you will have ₹6,000. But if you deposit the same ₹500 every month in an SIP, it won't remain stagnant—it will increase! Why? Because money deposited earns more money at a later date, and that earned money earns more mon...