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Make your Money Sweat!

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I do regular exercises at a gym near my home, we do about 10 routines every morning , each routine consists  of  about 3 sets of 12 reps each. Usually the first 5 routines will get done quickly that is 5*3*12 = 180 repetitions of a few exercises. Then the body starts to tire and then it becomes more challenging to do the rest of the 5  routines,  you need more breaks to do the work outs, this is also the time when you mind starts playing games, it urges you that  you are late for your other meetings ? or that your body is very exhausted and needs to rest or that today is not your day for hard work out etc… any excuse to keep you from continuing  your exercise. 

While chatting with my coach he was telling me how the first 5 routines are actually quite neutral ( no adding great value) , it is meant to only get your body to a certain state of warmth and preparation so that you could start doing the next 5 which is really where the body burns fat and creates muscle. But you can't do the next 5 routines without the first 5 routines done.  So it seems another example of Discomfort is the biggest catalyst for Growth 

Nature it seems has a strange way of conditioning our mind that to derive top results  you need to have discipline and perseverance.  Top Athletes  know  this trick which is why they will give their 10th routine the same attention, detail and effort that they gave their first ones. 

This applies to investing as well. 

Take the example of the simple SIP,  

Most people start SIP with a noble intent of creating long term wealth. This is an easy and passive route of setting aside a fixed amount every month into a set of mutual funds. The first  5 years are easy; it is equivalent to the first few routines in exercise, most will get it done or do it, but then it is usually not the most rewarding period of a corpus built up in an SIP. The biggest gains that happen in an SIP in my opinion in fact quite literally magic  happens  between the 15th & 20th year of the SIP. That is the time when the sum total of  accumulation till that date as also the fresh monies  being invested both help the corpus grow significantly ( akin to reaching the peak of fitness in exercising). 

As per a dated statistic of the AMFI data ( some years ago), 

At Least 70 % of SIPs are stopped within the first 5 years ; 

Another 15 % continue for the next 5 years;

 Only 15% carry on beyond 10 years ;

Less than 5%  continue into their 20th year.

So I daresay that less than 5% of all the SIP investors will see the full potential of their investments bear out, for 70% of investors  the SIP will make no difference to their wealth. 

Two Steps to change this :

  1. Align SIPs to your long term goals ( preferably 15 to  20 years…) that’s the  way you can stay  motivated to achieve your goal as well as get the best of Power of  compounding ;
  2. While Fund performance is important, give more importance to the discipline of continuing your SIP, Over a 20 year period, between the best performing and worst performing fund in the same category, the difference is likely to be insignificant.

So go forth and think Long term & Think Audacious Goals, am Sure it will help you build your Financial Muscle. 

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