Systematic Investment Plans (SIPs) have become one of the most popular ways to build wealth over time. With the power of compounding and rupee cost averaging, SIPs allow investors to accumulate a significant corpus with disciplined investing.
A SIP is a disciplined investment approach where a fixed amount is invested regularly in a mutual fund. The returns on SIPs depend on market performance, but historical data suggests equity mutual funds have delivered an average annual return of around 12-15% over the long term.
If you are considering starting an SIP of Rs 5,000 to Rs 15,000 per month, here's how your investment can grow over 10 years.
Projected Growth Of SIPs Over 10 Years
Using a SIP calculator, we can estimate how a monthly investment of Rs 5,000, Rs 10,000, and Rs 15,000 would grow in a decade, assuming a 12% annual return:
Rs 5,000 SIP
Investment amount: Rs 6 lakh (Rs 5,000 x 12 months x 10 years)
Estimated corpus: around Rs 11.62 lakh
Rs 10,000 SIP
Investment amount: Rs 12 lakh (Rs 10,000 x 12 months x 10 years)
Estimated corpus: Rs 23,23,390
Rs 15,000 SIP
Investment amount: Rs 18 lakh (Rs 15,000 x 12 months x 10 years)
Estimated corpus: around Rs 34.85 lakh
These calculations highlight the power of compounding, where returns are reinvested to generate further earnings.
Benefits Of SIP Investing
Investing a fixed amount every month ensures you buy more units when prices are low and fewer when prices are high, reducing the overall cost per unit.
The longer you stay invested, the higher the compounding benefits, as your returns generate additional returns over time.
SIPs encourage regular investments, helping investors build a habit of saving and investing for long-term financial goals.
Investors can start with a small amount and increase contributions over time through SIP top-ups.
Factors To Consider Before Starting A SIP
SIPs work best when held for long durations, ideally 7-10 years or more.
Equity funds are subject to market fluctuations; investors should assess their risk appetite before investing.
Choose funds with a strong track record and consistent performance to optimise returns.
Investing a higher amount over time through SIP top-ups can help counter inflation's impact on purchasing power.
In conclusion, investing in SIPs is a proven strategy for wealth creation. A monthly SIP of Rs 5,000 to Rs 15,000 can generate a substantial corpus over a decade, making it an effective way to achieve financial goals.
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