SIP in a Nifty 50 index fund means investing in the top 50 companies in India, which provides proper diversification without the need for too many funds in the portfolio.
Accumulating a Rs 1 crore corpus with a monthly investment of Rs 10,000 may seem impossible to many, but it is achievable, without even engaging in daily trading. The most viable method to achieve this target is through a Systematic Investment Plan (SIP). According to experts, accumulating Rs 1 crore in 20-25 years with a Rs 10,000 monthly SIP is realistic and easily achievable for an average retail investor with a disciplined approach.
History suggests that equity is the only asset class that outperforms over the long run. According to Prasenjit Paul, an equity analyst at Paul Asset and the fund manager of 129 Wealth Fund, the Nifty 50 index has generated around 14 per cent average annualised returns over the last 20-25 years.
“Thus, a monthly SIP of 10,000 in a Nifty 50 index fund can realistically generate 1 crore over 20-25 years,” Paul said.
What does SIP in Nifty 50 Index mean?
SIP in a Nifty 50 index fund means investing in the top 50 companies in India, which provides proper diversification without the need for too many funds in the portfolio. Moreover, since an index fund is a passive fund, it is the lowest-cost option and mirrors the overall economic growth of India over the long run.
What are the biggest mistakes investors make while trying to compound wealth?
“Recency bias is the biggest barrier to long-term compounding. Investors often use the previous year’s returns to extrapolate future earning potential. By doing so, a bad year often demotivates them from continuing SIPs, while a good year brings overexcitement that disrupts a disciplined approach. For similar reasons, investors often become greedy and invest in the best-performing funds of previous years, assuming the continuation of outperformance. However, this results in frequent switching and over-diversification, which ultimately affects long-term returns,” Paul added.
The root cause of all these mistakes is tracking portfolio value on a daily basis. The more you follow daily ups and downs, the higher the chances of deviating from a disciplined approach. It is easier to hold real estate for 5–10 years or more because real estate is not valued daily. Similarly, the best way to stay disciplined is to avoid tracking daily price volatility.
