The Power of Incrementalism: Running and Investing – Part 2
Taking the discussion forward it is very easy to draw the power of incrementalism in the world of finance.
Take SIP’s for instance. It is a very good analogy to the disciplined regime of running.
SIP is a facility; this facility is available with almost every mutual fund house. It helps you in achieving a large goal by taking small steps. Small amounts coupled with the power of compounding go a long way in building long term wealth. People have slowly started to take notice of sips more and more people are doing sips today. As per the latest report close to 1 crore sips are registered with the various mutual fund companies and they add close to 350 crore of AUM on a monthly basis. A sip can be started with as low as Rs.1000 (some companies accept Rs.100 also). But to see the benefit one needs to give time to the sip and the benefits are only visible over longer periods of time.
Take for instance retirement, it is one goal that everyone should have in fact it is a default goal. The way the cost of living is increasing it is but obvious, to enjoy a stress-free retirement one needs to plan over a longer time horizon.
With increasing healthcare facilities, the average life expectancy has also dramatically increased. Longer you live larger the retirement pool needed for survival. Gone are the days when pension from the organisation used to help people take care of their needs with private companies not provisioning for pension and no social security in place the EPF accumulation over the life of one’s career falls woefully short of the corpus required to take care of the post retirement life. Retirement is a long-term goal and only the power of incrementalism can add value to the desired outcome.
In the era of floating returns and low interest rates the ability of equity to deliver higher returns is the only and arguably the best option. Equity as an asset class has historically delivered returns beating inflation by a good margin. Equity comes with its own drawback they are volatile in the short run. Like a running enthusiast if you want to see results over the short run there is a big fat chance that you will be disappointed. Many sources (finance websites and journals) have demonstrated time and again that the return generating potential of equities is unmatched and there are no better options available in the market which can match with equities in the long run.
The beauty of sip in an equity fund stems from the fact that when markets fall the inherent design of the sip gives an edge to the investor. You get more number of units when markets fall and all the units which were purchased at a lower cost swell up in value making it a brilliant investment solution whenever markets go up.
Embrace the power of incrementalism not only for your physical and mental well-being but also for your financial well-being.
Add the miles and add on to your wealth. Sooner, you commit yourself to this discipline the better it gets.
