Walking thirty minutes a day is good for health. Eating simple vegetarian diet is also considered good for health. But not all of us walk or eat simple food. There is nothing great in the suggestion to walk or have good diet. These are very simple suggestions but are extremely effective if followed upon.
SIP is also a very simple idea of investing a fixed sum every month for many years. There are few million SIP investors in the country. I would not be surprised if it becomes tens of millions over next one decade. As we’ve seen above being simple or common does not mean it is inferior. All of you have been SIP investors for long with a minimum commitment period of one decade. You’re already seeing the result of this simple method.
I was reading Mutual Fund Insight magazine of this month. One example attracted my attention and thought of sharing the same. If you’ve started investing 20 years ago, Rs.10,000 a month in HDFC Tax Saver and increased the contribution by 10% every year, you would have invested Rs.68.7 lakhs over last 20 years. The value of the same now is Rs.7.06 crores, an annualised return of 24.78%.
Who would have got this return? Someone who invested for 20 years, while increasing SIP contribution regularly, completely ignoring plenty of bad news which he kept hearing frequently and staying the course without wavering. This sounds very simple but extremely difficult to follow.
All of you, our clients, are sticking to this simple but effective discipline. You’ve achieved what is behaviourally difficult for many investors to achieve. We would continue to offer simple and effective solutions while ensuring you stay the course.
We may not get in future the kind of returns an investor would have got in the example cited above. But equity is the best asset class to own in India for long term. The returns would be superior to what we can get elsewhere.
In personal finance and investing, simplicity triumphs complexity by a wide margin. What is simple is also mostly effective.
Keep up the behaviour and continue to stay the course.