Who doesn’t fancy a bank balance of Rs 1 crore? To lead a comfortable and happy life, one must have a financially secured future. To achieve this, one needs a lot of perseverance and patience. They must also adopt a good financial strategy and exercise investment discipline on a regular basis. What’s better than an SIP investment? This article will explain how an SIP investment of Rs 10,000 per months for 20 years can help you become a crorepati.
What is SIP?
Systematic Investment Plan is a way for investors to invest in mutual funds. Under SIP plans, a predetermined sum of money is invested in desired mutual fund schemes at regular intervals for a predetermined period of time. The periodicity of the intervals can be daily, weekly, monthly, annually, etc. When you invest in mutual funds via SIP, you simply allow the AMC (asset management company) or the fund house to deduct specific amount of money from your bank account at regular intervals and invest in desired schemes on a specific date.
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How can Rs 10,000 turn into 1 crore in 20 years?
Megha starts an SIP of Rs 10,000 per month in ABC scheme that yields returns at 12% per annum. Let’s assume she continues to invest Rs 10,000 per month for a period of 15 years. Using SIP calculator, you can estimate that after a period of 15 years, she’d accumulate around Rs 50.46 lacs. If she would have continued to invest for 20 years, she’d accumulate around Rs 1 crore.
As you can see, the longer the stay invested, the higher corpus you are likely to accumulate after a period of time. Why is that? This is thanks to the power of compounding. Under compounding effect, returns are reinvested to further earn returns on mutual fund investments. Thus, compounding is rightly claimed as the eighth wonder of the world by several experts. Remember, the earlier you start, the more you are likely to earn returns on your investments.
Would a corpus of Rs one crore be enough to fulfil your future financial needs and goals?
While this seven-figure sum might seem a noteworthy amount currently, the same might not be true after a few years. In essence, the sum of Rs 1 crore might lose its value over a period of time. And if your investments require around 15 to 20 years to achieve this corpus, it might lose its charm. The infamous concept is known as the power of inflation. Inflation has a tendency to digest a significant part of your earnings. Due to this, a consumer’s purchasing power parity also diminishes over time. Thus, an investor is advised to always account for inflation before they plan their mutual fund investments. So do not waste more time and start investing today to become a crorepati tomorrow. Happy investing!