Have you ever thought investing just Rs 7,000 a month can turn into a massive Rs 21 crore corpus for retirement? It sounds hard to believe, but it is possible with the help of the power of compounding. In this article, we will understand how investing regularly, through mutual fund SIP, can add up to a huge amount over time. We’ll even do the calculations to help you figure out how long it’ll take to reach your goal.
What is SIP?
A Systematic Investment Plan (SIP) is a method of investing a fixed amount in mutual funds. Investors can invest daily, weekly, monthly, quarterly, or yearly, depending on their choice.
Why choose SIP?
SIP is beginner-friendly, by investing even a small of Rs 100 regularly, first-time investors can start their journey toward building a sizeable corpus. It is also convenient, with automated deductions you don’t have to worry about missing out on investment.
Why should one start investing early?
To get maximum returns from investment in the long run one should start investing early. Let’s understand it through an example.
Start early
Investor A: Starts investing ₹5,000/month at age 25 and continues till age 45 (20 years).
Total Investment: ₹12,00,000
Maturity Amount (at 12% annual return): ₹50,00,000
Investor B: Starts investing ₹5,000/month at age 35 and continues till age 55 (20 years).
Total Investment: ₹12,00,000
Maturity Amount (at 12% annual return): ₹28,00,000
By starting 10 years earlier, Investor A earns ₹22,00,000 more, showcasing the power of compounding.
SIP calculations
Target corpus: Rs 8 crore
Monthly investment: Rs 7,000
Annualised return: 12 per cent
How long it will take to create a corpus of Rs 8 crore
It will take approximately 40 years to generate Rs 8 crore.
How much can Rs 7,000 monthly SIP build in 10 years?
The investment amount will be Rs 8,40,000, the capital gains will be Rs 7,86,374, and the estimated retirement corpus will be Rs 16,26,374.
How much can Rs 7,000 monthly SIP build in 20 years?
The investment amount will be Rs 16,80,000, the capital gains will be Rs 53,14,035, and the estimated retirement corpus will be Rs 69,94,035.
How much can Rs 7,000 monthly SIP build in 30 years?
The investment amount will be Rs 25,20,000, the capital gains will be Rs 2,21,89,396, and the estimated retirement corpus will be Rs 2,47,09,396.
How much can Rs 7,000 monthly SIP build in 40 years?
The investment amount will be Rs 33,60,000, the capital gains will be Rs 7,98,16,942, and the estimated retirement corpus will be Rs 8,31,76,942.
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)