Mutual fund SIPs have gained immense popularity as a modern investment tool for investors. A Systematic Investment Plan (SIP) is a disciplined approach to investing that helps in wealth creation through the power of compounding. SIPs are an excellent option for beginners, as they allow investments without requiring a large capital outlay. They also offer the benefit of rupee cost averaging.
Investors have a wide range of options to choose from when starting mutual fund SIPs. It’s crucial to do thorough research and select the best option based on their financial goals and risk tolerance.
The growing popularity of SIPs is a testament to the increasing trust of retail investors and the rising acceptance of mutual funds beyond tier-1 cities. Additionally, the introduction of diverse and innovative products in the mutual fund industry has further contributed to the consistent growth in SIP adoption.
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In this story, we will explore how one can build a corpus of Rs 1 crore through SIPs. Let’s evaluate three scenarios based on monthly SIP contributions of Rs 5,000, Rs 10,000, and Rs 20,000, and calculate how long it will take to achieve the Rs 1 crore target.
The calculations will consider an assumed annual return of 15% (a common expectation these days based on returns delivered by several equity mutual funds).
Scenario 1: Rs 5,000 per month
Time to reach Rs 1 crore: 22 years
Total investment: Rs 13.20 lakh
Estimated returns: Rs 90.33 lakh
Total value after 22 years: Rs 1.04 crore
Scenario 2: Rs 10,000 per month
Time to reach Rs 1 crore: 18 years
Total investment: Rs 21.60 lakh
Estimated returns: Rs 88.82 lakh
Total value after 18 years: Rs 1.10 crore
Scenario 3: Rs 20,000 per month
Time to reach Rs 1 crore: 14 years
Total investment: Rs 33.60 lakh
Estimated returns: Rs 80.78 lakh
Total value after 13 years: Rs 1.14 crore
These calculations show how higher contributions and longer investment durations can significantly impact wealth creation through the power of compounding.
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