Systematic Investment Plan (SIP) is an investment tool through which you can invest a fixed amount in a scheme of mutual funds at regular intervals – monthly or quarterly, instead of paying a lump sum amount. The installment can be as low as Rs 500 per month, which is very similar to a recurring deposit. It is also convenient because you can give a standing instruction to your bank to debit this amount from your account every month.
SIP has become very popular among investors as it helps them invest in a disciplined manner without worrying about the volatility of the markets and timing. For long term investments, SIP is arguably the best way to enter the world of investments.
If you invest regularly through SIP, you can accumulate a large corpus through small monthly installments. For example, if you invest Rs 1000 every month, it can create a corpus of around Rs 1 crore in the long run. Similarly, monthly SIPs of Rs 3000 and Rs 5000 can also help you achieve goals of Rs 1 crore over time.
Also read: Mutual Fund SIP Calculator: Rs 100 daily investment can take you to Rs 2.61 crore corpus in 20 years – Check out this MF scheme
In this story, we will explore how many years it will take for an investor to accumulate a corpus of Rs 1 crore by investing Rs 1000, 3000, and 5000 per month, assuming an annualized return of 14%.
Example 1: Monthly SIP of Rs 1,000
If an investor invests Rs 1,000 per month for 35 years and gets an annualised return of 14%, which is moderate considering the yields shown by various schemes in the past, a total corpus of Rs 1.12 crore can be made.
Total investment: Rs 4,20,000
Estimated returns: Rs 1,08,12,486
Total value: 1,12,32,486
Example 2: Monthly SIP of Rs 3,000
If an investor invests Rs 3,000 per month for 27 years at an annual return of 14%, he would accumulate over Rs 1 crore.
Total investment: Rs 9,72,000
Estimated returns: Rs 99,19,599
Total value: 1,08,91,599
Example 3: Monthly SIP of Rs 5,000
For an investment of Rs 5,000 per month, it would take about 23 years to reach a corpus of Rs 1 crore at the same 14% return.
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