Small amounts saved and invested

Small amounts saved and invested every month over a period of time can create a large corpus. Therefore, Rs 5,000 saved and invested every month for a period of 20 years would grow to Rs 30 lakh at a conservative rate of 8% and at  15%, this could even grow upto Rs 76 lakh.

The SIP facility not only inculcates financial discipline among investors, it helps the investor to negate the effects of market cycles as well. SIPs help to create wealth in a convenient and time-tested manner while providing the benefit of averaging. In a rising market the amount invested will fetch lesser units while in a falling market the same amount will get more units thereby providing the investor a low average cost per unit. Consequently, it prevents the investor from trying to time the market.

SIPs works best for investors having long-term goals, say, for their child's higher education or marriage or creating a retirement corpus. In each of these cases a specific monthly amount can be allocated towards these goals.

If you have a lump-sum but wish to invest that every month systematically, you could opt for a Systematic Transfer Plan (STP) where money is debited from a liquid fund in the same fund house and transferred to the equity fund as per the period specified by you.