Reaching a goal of Rs 1 crore is a key financial milestone for many. It is often seen as an important step towards long-term financial security. However, the time required to achieve this goal depends on income levels, savings discipline and investment strategy.
With a proper plan, consistent investing and disciplined spending, some investors may reach this target in around just five years. This timeline is more ideal for investors with relatively higher income levels. With less time, more amount is needed to reach a similar corpus goal because the power of compounding gets less time to work.
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For beginner investors, such a milestone may take 10 years or even 20 years. In any case, staying consistent remains the key. For long-term goals, one of the ideal aspects is that the power of compounding gets sufficient time to work, requiring much less investment compared to shorter periods.
Investors may comfortably opt for systematic investment plans (SIPs) in mutual funds as longer time periods help reduce the impact of market volatility by spreading risks over time. This benefits the investors as they can enjoy the high returns offered by SIPs, without worrying about short-term volatility.
For someone wanting to build Rs 1 crore corpus over 5, 10 and 20 years through SIPs, here's what their investment journey may look like:
5-Year-Timeline:
SIP amount: Rs 1,22,000
Investment duration: 5 year
Expected rate of return: 12%
Invested amount: Rs 73,20,000
Estimated returns: Rs 27,43,336
Total value: Rs 1,00,63,336
A five-year SIP plan shows that investing Rs 1,22,000 monthly for 5 years at an expected return of 12% can build Rs 1 crore corpus, but the investment amount is much higher in this case. The total invested amount is Rs 73,20,000, with estimated returns of Rs 27,43,336.
10-Year-Timeline:
SIP amount: Rs 44,000
Investment duration: 10 year
Expected rate of return: 12%
Invested amount: Rs 52,80,000
Estimated returns: Rs 49,42,919
Total value: Rs 1,02,22,919
Compared with five-year-plans, a 10-year SIP plan with Rs 44,000 monthly investment at an expected 12% return can create similar wealth. The invested amount is Rs 52,80,000, with estimated returns of Rs 49,42,919, taking the total value to Rs 1,02,22,919.
20-year-timeline:
SIP amount: Rs 10,100
Investment duration: 20 year
Expected rate of return: 12%
Invested amount: Rs 24,24,000
Estimated returns: Rs 76,67,393
Total value: Rs 1,00,91,393
This calculation shows that higher investment periods in SIPs are significantly more rewarding for investors due to the power of compounding. In the case of a 20-year-timeline, the required investment is much less. This makes such a goal realistic for long-term investors, seeking solid returns without stressing their other financial obligations.
Investors should note that SIP returns are based on assumed rates and are not guaranteed. Actual returns may vary depending on market conditions, risk factors, etc. Investors are advised to consult experts before making any significant financial commitment.
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