Becoming a crorepati is a dream for people of all ages. For some, it is a milestone that represents financial freedom, while for others, it could help fund retirement, a child's higher education or other long-term goals. While building a Rs 1 crore corpus may appear challenging, starting early and investing consistently can make the target more achievable.
One of the popular ways to build long-term wealth is through Systematic Investment Plans (SIPs) in mutual funds. An SIP allows investors to invest a fixed amount at regular intervals, usually every month. This approach can help investors maintain financial discipline while allowing their investments to benefit from the power of compounding over time.
It is important to remember that mutual fund returns are market-linked and are not guaranteed.
To find out the monthly SIP needed to build a Rs 1 crore corpus, let's assume an expected annual return of 12%. The amount required, however, changes significantly depending on when you start. Here's a look at the monthly SIP required to target a Rs 1 crore corpus by the age of 45.
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If You Start Investing At 25
At 25, you have time as your biggest asset. With a longer investment horizon, the monthly contribution required is relatively lower. Over 20 years, your investment capital does less of the heavy lifting while compounding does the rest.
Monthly investment: Rs 10,200
Tenure: 20 years
Expected rate of returns: 12%
Total investment: Rs 26.48 lakh
Estimated returns: Rs 76.42 lakh
Maturity corpus: Rs 1 crore
If You Start Investing At 30
Starting at 30 leaves you with 15 years to reach the target. The shorter investment period means you need to contribute significantly more every month.
Monthly investment: Rs 20,500
Tenure: 15 years
Expected rate of returns: 12%
Total investment: Rs 36.90 lakh
Estimated returns: Rs 65.51 lakh
Maturity corpus: Rs 1.02 crore
If You Start Investing At 35
At 35, you have only 10 years left to build the corpus. The monthly SIP, therefore, rises sharply. You will need to invest more than double the amount of total principal cash out of pocket.
Monthly investment: Rs 44,000
Tenure: 10 years
Expected rate of returns: 12%
Total investment: Rs 52.80 lakh
Estimated returns: Rs 48.41 lakh
Maturity corpus: Rs 1.01 crore
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The comparison clearly shows that time plays an important role in investing. An investor starting at 25 needs to invest significantly less every month than someone who waits until 35, even though both are targeting the same Rs 1 crore corpus by 45.
The longer investment horizon gives compounding more time to work. Delaying the start by five or 10 years can therefore substantially increase the amount that needs to be invested every month.
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