SIP Calculation: How Rs 2,000 A Month Can Make You A Crorepati
Mutual Fund SIPs help in investing in equities and equity-linked instruments without getting direct exposure to market volatility.
It’s a dream for most investors, mostly those who belong to low or mid-income groups, to become a crorepati. Building a corpus of Rs 1 crore is a lifetime goal for many. It could seem a tedious task, but the goal can be achieved easily with financial planning and a disciplined approach.
Mutual Fund SIPs, or Systematic Investment Plans, have emerged as the easiest way to invest in the stock-market-linked funds. In April, the SIP inflows reached a record high of Rs 26,632 crore, reflecting the investor confidence in this investment strategy, Association of Mutual Funds in India (AMFI) data showed.
Even an amount of Rs 2,000 per month in SIP could be an effective start to your ambitious goal of accumulating Rs 1 crore. With a long-term horizon, the invested money could benefit from compounding. This can help you build a significant corpus with even small contributions every month.
According to experts, mutual fund SIPs also encourage financial discipline, helping investors take a regular stock of their spending habits.
On the other hand, significant financial milestones like having Rs 1 crore in savings can also be achieved with SIPs, depending on the investment horizon and SIP contribution. Ideally, if someone has a significant investment horizon of at least 30 years, they can enjoy their retirement with a Rs 1 crore corpus with an SIP of just Rs 2,000 every month.
Assuming an annualised return of Rs 12%, if one invests Rs 2,000 monthly for at least 30 years, here’s how the corpus will grow.
Investment tenure: 30 years
Investment amount: Rs 7.2 lakh
Estimated returns: Rs 54.42 lakh
Total corpus: Rs 61.62 lakh
Here’s where the magic of compounding is really visible. In order to achieve the Rs 1 crore corpus, you need to increase the amount to Rs 2,833 per month.
Your total investment over 30 years will be Rs 10.2 lakh. At an annual interest rate of 12%, the total return on your SIP will be Rs 89.8 lakh and your total corpus will grow to Rs 1 crore.
If you want to continue with the Rs 2,000 per month SIP amount to achieve the Rs 1 crore goal, you just need to increase the tenure by another five years.
Just check this calculation:
Investment tenure: 35 years
Investment amount: Rs 8.4 lakh
Estimated returns: Rs 1.02 crore
Total corpus: Rs 1.1 crore
To make this wealth creation strategy more effective, investors can choose to increase their annual SIP amount by 10% every year. This strategy doesn’t hurt the pockets and also helps in achieving the goal earlier than the estimated timeline.
Investors should also consider factors like inflation and taxes to have a more realistic roadmap for their financial journey.
