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I've got larger response for my article on Systematic Investment Plan - where people seems to be really curious and interested in creating wealth using SIP.

Many people asked about right time of starting Investment through SIP and ideal amount for such SIP investments. This article may prove to be helpful for all those readers who are aspiring to create good amount of wealth using SIP.

Ideal Amount for SIP:

Ideally the amount could vary based on the risk appetite of individual and the portion of his monthly income he/she wants to invest in SIP. I guess investors should follow 80-20 rule, for such allocation. Let's understand this through an example. My friend Rahul is 23 years old. He's earning 30k per month. He doesn’t have many liabilities from the family and he's having HIGH risk appetite. He can save 15k from his monthly salary and want to invest maximum in the stock market related instruments.

I would advise him to invest 80% of his monthly saving (12k) into equity and equity oriented instruments. The rest 20% (3k) should get invested into less risky investment options like, PPF. Does this rule apply all the time? No. He should keep reviewing his responsibilities and liabilities and risk taking ability every 3 to 6 months and based on that he should modify his investment profile with 80-20, 75-25 or 70-30 investment rule.

Timing the SIP – Start Early:

I strongly believe that investment in SIP should start at the earliest because there’s definite reason behind this and let’s understand this with example.

Let's compare two friends: Mit and Jigar. Mit has started investment at pretty early stage. He started saving Rs750 per year from the time he was 15. After 15 years he has stopped this investment. So his total investment till date is Rs. 11250 over the tenure of 15 years.

On the other hand, Jigar starts investing Rs. 5,000 per year when he is 30 and will continue investing this amount every year till he is 60. So his total investment would be Rs. 300000 over the tenure of 30 years.

If both earn 15% return per annum then, who will create more wealth when they retire at the age of 60?

Answer is Mit. His annual saving of Rs. 750 between the age of 15 to 30 would aggregate to Rs 27.7 lacs when he’ll be 60, whereas Jigar’s Rs. 5000 annual savings between age of 30 to 60 would accumulate to Rs 25 Lacs when he’ll be 60.
Here, it’s essential to understand the power of compounding and it’s the single most reason for you to start investing immediately. Even small chunk of investment makes big difference over the period of time. You can see Mit and Jigar both would create enormous wealth, compared to their investment. But for Mit it took really less money and the time duration to build the wealth as he started at the early investment. This highlights the importance of starting early and right at your investment.
In a nutshell, “Your money never sleeps. It’s working for you 365*24*7, so start early at your investment.”

Happy Investing!!