Investing small will always give you big rewards. Even something as small invaluable such as a small iron axe has potential to give big returns. But all it takes is the right market conditions and the discipline towards your goal.
Surely, you must know the story about the axe cutter and his iron axe. With his simple asset of his iron axe, he managed to earn a simple return, through the wood he sold to the villagers on a daily basis. However, on one unforeseen day he dropped his iron axe into the river, putting the small asset that earned him is daily income into a loss. But as it turns out, divine intervention in the form of a supernatural being, offered him something larger and more valuable in return. He was offered a silver and a gold axe in turn, for his lost iron axe. But his humble nature persuaded him to seek his iron axe over the gold and silver axes. As a reward, he not only got back his iron axe, but also the silver and gold axe.
A folklore no doubt, based on the moral of humbleness will be rewarding can be perceived here. But it shows us so much more. As much as we would love the aspect of divine intervention interceding for us, and impart upon us, a gold and silver axe in turn, it would take a miracle of monumental proportions for such an occurrence.
Or you can take the simple way out an invest in the SIP market.
With the markets being at an all high, SIP investments are also on the increase. Plenty of investors are now investing in SIP investment schemes, as they offer high returns. But what makes the SIP investment plan a great investment option? And how does it really connect to the iron axe of the woodcutter?
The SIP plan is nothing but a systematic savings plan that will help you achieve your financial goals, while simultaneously participating in the financial markets. As an investor in the SIP market, you can choose your preferred mode of investment, in mutual fund schemes of your choice for different tenures. Going back to the folklore, we see the woodcutter earning a small income through a small asset of his iron axe, meeting his goal of earning a daily living. But under different, albeit an unexpected circumstance, his small asset was invested in unexpected and unpredictable waters, must like the nature of the mutual fund market. Now we go on to see how the river and the mutual fund sip investment market are similar to each other.
The mutual fund sip investment market is driven by market trends that can change unpredictably. They may offer you high returns, or may take away your asset. The woodcutter invested his small asset in the unpredictable waters of the river, but as the folklore goes, the market offered him a good return in the form of his axe. He even got additional returns through the silver and gold axes in turn.
However, at the same time, he did face the risk of losing his asset to same unpredictable waters. What would have happened if the divine being hadn’t heard his pleas for the return of his lost axe? He would have lost his asset and his small but daily income, to the unrepentant waters, let alone receive the gold or the silver axe.
No, a desperate prayer for assured returns will definitely not work to get your returns in today’s reality. But understanding the key features of the SIP plan and implementing it in your investment strategy is one step closer to it.
Here are some of the key features of the SIP plan you need to be aware of and can implement in your SIP strategy:
Small and regular investment: The SIP plan will help you achieve your financial goal, even with a small sum invested, just like a small iron axe. With a small amount invested in periodic intervals, it will be easier on your pocket, especially on a weekly, fortnightly, monthly or quarterly basis. This also makes it a simple and affordable for beginners to start investing in simple SIP investment schemes.
Disciplined Investment: The axe cutter wanted his iron axe back, for the reason alone that it would help him cut. By this, we can safely assume that he wanted to resume work even after he was presented with the returns of gold and silver axes. This discipline shows us his desire to continue his investment. You too need to maintain the habit of investing over a period of time, even though you may get a small reward on the way. As the name implies, systematic investment plan is a strategy to invest a particular amount on a fixed and regular basis. Over time, it will bring disciple to your investing habits, especially when you start investing small sums over large lump sums.
Ease of investing: No you don’t have to through your investment into the river to get a return on investment in today’s time. There’s a simpler way to go about investing your asset, albeit a convenient one. With the markets going digital, you can simply execute an online sip investment through the digital platform. With the available platforms, you can easily make paperless transactions with quicker results and hassle-free procedures. You can even link your portfolio to your bank account, where you can enable uninterrupted automatic investments.
Understand the power of compounding: While the story does end with the iron axe being returned with the gold and silver axe, imagine if the same three axes were thrown back into the river with the possibility of a return? Could you imagine what would the returns would be like? For one asset, the woodcutter got 2 more. If three were invested, he would have got a chance at 6 more assets. This concept is known as compounding. It is one of the biggest force that drives investments. While you may start your SIP investment schemes small, you can start compounding even small investments. You only need to start early, and build opportunities of higher returns. The small investment you will invest over the next few months, will generate returns on invested period. Added together and invested, you will get bigger investments. A SIP calculator will help you in this avenue for more clarification.
Rupee cost averaging: No matter what trends you keep track of, or what knowledge you gain from the market, no one will be able to time the market. Did the woodcutter drop his axe at a precise time to get the returns he wanted? Neither would you, especially with the SIP investment plan. Since the investment with SIP is made at regular intervals, more units are bought, especially in a declining market. Once the market heads upward, the value of your investments will also grow in sync. Since the SIP market thrives on the divergence in returns between SIP and lump sum will increase.
As you can see, SIP investments can be successfully executed for good returns if you only implement the key factors in your SIP investment strategy. No longer do you need to invest your assets in volatile waters, but with a systematic investment plan you will get the rewards you deserve.