Building wealth is not a get-rich-quick game, but it's a long-term process that requires discipline and long-term financial commitment. With consistency and effective money management, building a large corpus can be easily achieved. For many investors, reaching the target of Rs 10 lakh could be a significant financial milestone.
It may sound like a negligible amount due to the rising cost of living these days, but accumulating Rs 10 lakh brings confidence and financial security.
One of the most effective ways to reach this goal without straining your monthly budget is to opt for a Systematic Investment Plan (SIP). The benefit of a SIP lies in its flexibility. Depending on your time horizon and the returns generated by your chosen fund, the amount you need to invest can vary drastically.
Mutual fund SIPs harness the power of compounding and rupee cost averaging. This makes them ideal for salaried individuals and those with irregular incomes to invest a small amount at regular intervals, like monthly or quarterly, for various financial goals. The best part is that SIPs allow investors to choose the amount and the tenure as per their financial needs and ability to invest.
However, it's important to remember that the rate of return and investment tenures play a crucial role in building a sizeable corpus through SIPs. A higher rate of return helps to build a substantial corpus even in a short duration.
Building Rs 10 Lakh Corpus With SIP At Various Returns
Let's see how much you need to save every month to hit the milestone of a first Rs 10 lakh corpus over a span of 10 years. Here, we assume different interest rates per annum over a fixed tenure of 10 years.
Investing In Mutual Fund SIPs At 8% Return:
Monthly investment: Rs 5,550
Tenure: 10 years
Expected rate of returns: 8% per annum
Total investment: Rs 6.66 lakh
Estimated returns: Rs 3.4 lakh
Maturity corpus: Rs 10.06 lakh
Investing In Mutual Fund SIPs At 10% Return:
Monthly investment: Rs 5,000
Tenure: 10 years
Expected rate of returns: 10% per annum
Total investment: Rs 6 lakh
Estimated returns: Rs 4.07 lakh
Maturity corpus: Rs 10.07 lakh
Investing In Mutual Fund SIPs At 12% Return:
Monthly investment: Rs 4,500
Expected rate of returns: 12%
Tenure: 10 years
Total investment: Rs 5.4 lakh
Estimated returns: Rs 4.68 lakh
Maturity corpus: Rs 10.08 lakh
The above calculations indicate that the required monthly SIP amount declines with an increase in the rate of return. This also means that if you don't want to invest a substantial amount every month in an SIP, you have to increase your investment horizon to achieve the target of Rs 10 lakh.
It is important to note that SIP investment returns are never guaranteed and actual outcomes will depend on market conditions and fund performance.
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