- Many investors prefer SIPs for long-term wealth creation over fixed deposits
- Starting early and investing consistently is key to building a large corpus via SIPs
- A 20-year SIP at 12% returns requires Rs 30,026 monthly to reach Rs 3 crore
With growing interest in mutual funds, many investors are turning to SIPs for long-term wealth creation. This shift is driven by the potential for higher returns compared to traditional options like fixed deposits (FDs). Over time, mutual funds have shown strong performance, particularly for investments over longer durations, while offering more flexibility to investors.
This is why many people are considering mutual fund systematic investment plans (SIPs) as more suitable investment instruments for building a large retirement corpus. Starting early and staying invested over a long-term horizon, like 15 to 20 years or more, could be the key to building a sizeable corpus fund through SIPs.
Mutual fund SIPs offer the flexibility of choosing the amount and the tenure as per your needs. Due to the power of compounding, small investments every month can grow into a substantial corpus over the long term.
Let us say you are looking to build a Rs 3-crore corpus through SIPs. Here's how you can achieve the target over various tenures.
How To Build Rs 3-Crore Corpus Over 20, 25 and 20 Years
If one starts investing early and stays consistent, the required monthly SIP for a Rs 3-crore goal is affordable. Let's see how much you need to invest every month via SIP to accumulate Rs 3 crore.
Scenario 1:
Tenure: 20 years
Expected returns: 12%
Investment needed per month: Rs 30,026
Total investment: Rs 72 lakh
Estimated Returns: Rs 2.28 crore
Scenario 2:
Tenure: 25 years
Expected returns: 12%
Investment needed per month: Rs 15,809
Total investment: Rs 47.42 lakh
Estimated Returns: Rs 2.53 crore
Scenario 3:
Tenure: 30 years
Expected returns: 12%
Investment needed per month: Rs 8,499
Total investment: Rs 30.59 lakh
Estimated Returns: Rs 2.69 crore
The calculations above show that investment duration is the key to your wealth accumulation journey. A longer investment horizon could help to accumulate the same amount with a smaller amount.
To maximise returns, investors could consider allocating funds into a mix of mutual fund categories, including large-cap, mid-cap, and small-cap funds. Additionally, exploring flexi-cap and multi-asset allocation funds can help diversify the portfolio and manage risk.
However, considering the ambitious target of Rs 3 crore, consulting a financial advisor might be prudent as it would help customise a suitable financial strategy while minimising risks.
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