Building your first Rs 1 lakh does not necessarily require a large income or a hefty one-time investment. For many first-time investors starting their investment journey, putting aside a fixed amount every month can be enough to gradually reach this important financial milestone.
A monthly investment of Rs 5,000 may look modest to young earners, students, homemakers and those just beginning their savings journey, but over time, regular contributions and returns can help investors build a sizeable corpus. The big question, however, is how quickly this amount can take you to the Rs 1 lakh mark.
We have done the math to understand how long it could take with a Rs 5,000 monthly investment through a mutual fund SIP and a Post Office Recurring Deposit (RD).
Also Read: Rs 1 Lakh Or Rs 10 Lakh: Which Financial Milestone Should You Target First
Investing In Mutual Fund SIPs:
A Systematic Investment Plan (SIP) allows investors to put a fixed amount into a mutual fund at regular intervals. If you invest Rs 5,000 every month, your total contribution over 18 months would be Rs 90,000.
At an assumed annual return of 12%, the investment could grow to roughly Rs 98,000, which means the Rs 1 lakh milestone may take slightly longer than 19 months.
Monthly investment: Rs 5,000
Tenure: 1.7 years
Total investment: Rs 95,000
Expected returns: 12%
Estimated returns: Rs 9,054
Maturity corpus: Rs 1.04 lakh
If you want to reach the Rs 1 lakh target sooner, one straightforward way is to increase the monthly contribution rather than taking additional investment risk.
Even increasing it by Rs 500, that is from Rs 5,000 to Rs 5,500, can help bridge the gap between the amount invested and the target corpus.
It is important to remember that mutual fund returns are market-linked and are not guaranteed.
Post Office Recurring Deposit (RD)
Investors, particularly middle-class families, small business owners and parents saving for children's education or marriage expenses, who do not want to take market risk can consider a Post Office Recurring Deposit (RD).
Unlike equity mutual funds, an RD provides a fixed interest rate, subject to the applicable government-declared rate and scheme rules. It allows investors to deposit a fixed amount regularly and build their savings over time.
At an assumed interest rate of 6.45% per annum, a monthly investment could take around 21 months to reach the Rs 1 lakh target.
Interest Rate: 6.45% per annum
Time to reach ₹1 Lakh: ~1 months
Maturity Value: Rs 1,11,406
Aggregate Interest Amount: Rs.6,406
Also Read: Rs 4 Crore Retirement Corpus With EPF? Check The Salary, Contribution And Interest Needed
The key difference between the two options is that an RD offers greater predictability, while mutual fund SIPs have the potential for higher returns but carry market risk.
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