There will be a phase of ups and downs in the stock market, history shows that the market falls as fast as the market and it runs faster than that. Therefore, if you are investing money in equity through mutual funds, then you can raise big funds in a long period. This requires only the right strategy.
Actually, the Systematic Investment Plan (SIP) is very popular among Indian investors, and it has made big money in the long term. A special formula of ’10-7-1 ‘works for this. This rule focuses on understanding market volatility, long -to -be invested and increasing SIP amounts. The special thing is that this formula is going to do the best work on salary professionals. You can achieve the financial goal by adopting this formula.
Now let’s know whether the ’10-7-1′ rules?
The first part of this rule is ’10’, Which shows the expectation of 10% decline in the Indian stock market on an average of 10%. This has happened during the last 23 years of the last 23 years. In such a decline, experienced investors continue SIP instead of panic, as more units can be purchased at low NAV (net asset value) at the lower level of the market.
The second part of it is ‘7’, At least 7 years of investment reflects the Herosone. Data suggests that the possibility of positive returns increases when the large cap, flexi cap and invested in the Nifty 50 index funds for 7 or more years. Not only this, following this deadline reduces the risk of investment and increases the chances of returns. For example, you can take that time on 2000-2007, 2007-2014 or 2015-2022. This formula has always given beneficial results on long -term investment. Actually, this formula shows the effect of a particular tenure and compound interest (compounding).
The third part of this formula is ‘1’, That is, every year. This means that every year you should increase the amount of your SIP by at least 10%. So that in the long term, your portfolio can make almost double the money compared to normal returns. For example, if you do SIP of 10 thousand rupees a month and get 12% returns on it, then after 15 years you will get about 47 lakh rupees. But if you increase the investment amount by 10% every year with a monthly SIP of Rs 10 thousand, then after 15 years, a total of Rs 82 lakh will be received according to 12% return. If you get 15 percent return, you can raise an amount of more than one crore rupees. This formul is called Step-up-SIP. Step-up-SIP means that while continuing investment, the amount of investment also has to be increased at a fixed time.
Compounding strength
Significantly, the investor is going to benefit from compounding here. Experts say that disciplined and patient investment is the basis for making real big funds. ’10-7-1 ‘formula is a guiding principle for those investors who want to make money in the long term, understanding the risk. Experts recommend that you set financial goals before starting investment and assess your risk capacity. Adopting step-up SIP can increase investment with increasing income, which helps in dealing with inflation.
Step-up-SIP (Systematic Investment Plan) allows you to increase your income as well as increase your monthly SIP contribution annually. For example, if you start with SIP of Rs 10,000 per month, you can increase the amount by 10% by investing Rs 11000 in the second year.
(Note: Be sure to help financial advisor before investing in mutual funds)