In order to achieve long-term goals in life, millions of young investors in India look forward to mutual funds' systematic investment plans (SIPs) to build wealth. Unlike lump-sum investing, where you are required to put a big amount at once, SIPs allow you to invest a fixed amount regularly, making it easier to stay disciplined and benefit from rupee cost averaging. A key highlight is that SIPs harness the power of compounding, which means that the returns generate further returns over a period of time, leading to exponential growth in wealth.
How To Make Rs 2 Crore With SIPs?
For many investors, the target of Rs 2 crore might sound ambitious, but with the right strategy and time horizon, it is achievable. All you are required to do is to understand how much you need to invest each month and for how long.
Making careful adjustments to your SIP contributions across different time frames — such as 15, 20, or 25 years - allows you to plan realistically based on your income, expenses, and financial aspirations. While shorter horizon requires higher monthly investments, a longer one reduces the burden significantly.
Assuming that an individual invests in a mutual fund SIP generating an interest rate of 12% per annum, here's how much amount they would need monthly across different time horizons.
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1. Rs 2 Crore Target In 15 Years
- Monthly investment: Rs 40,000
- Tenure: 15 years
- Total investment: Rs 72,00,000
- Expected rate of returns: 12%
- Estimated returns: Rs 1,29,83,040
- Maturity corpus: Rs 2,01,83,040
2. Rs 2 Crore Target In 20 Years
- Monthly investment: Rs 21,000
- Tenure: 20 years
- Total investment: Rs 50,40,000
- Expected rate of returns: 12%
- Estimated returns: Rs 1,59,42,106
- Maturity corpus: Rs 2,09,82,106
3. Rs 2 Crore Target In 25 Years
- Monthly investment: Rs 11,000
- Tenure: 25 years
- Total investment: Rs 33,00,000
- Expected rate of returns: 12%
- Estimated returns: Rs 1,75,73,986
- Maturity corpus: Rs 2,08,73,986
The above calculations clearly highlight how higher monthly SIPs are required to reach the target when the tenure is 15 years. But you can achieve the same target with less investment if you give more time to it.
This is the reason why experts advise people to start investing early to take maximum benefit of power of compounding.
Also Read | Retirement Planning at 40: SIP Strategy That Can Help You Build Rs 3 Crore
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