It is true that a big sum like Rs 20,000 or more can do wonders in investment, but one should not underestimate the power of a small amount. It can make a big difference in the long run. An example would work best to make you understand how a small amount can make a big change. The secret lies in early investment. For example, suppose you and your friend thought of investing in a systematic investment plan (SIP). You started your investment journey instantly at the age of 25 with Rs 5,000 as a monthly investment. You continued investing till age 45 for approximately 20 years. In return, at the end of the investment period, you would probably get an estimated Rs 12,00,000 (at 12 per cent annual return).
On the other hand, your friend decided not to invest instantly as you did, and he/she decided to wait until they turned 35. Now your friend is all set to invest at the age of 35 with the same amount as yours, Rs 5,000 and continues till age 45 (10 years). Your friend would probably get an estimated Rs 11,20,179 (at 12 per cent annual return). By starting 10 years earlier, you earned Rs 34,79,108 more, showcasing the power of compounding. On that note, let’s find out how quickly you can generate a Rs 1 crore corpus with just a Rs 3,000 monthly investment.
Also read: Power of Rs 7,000 SIP: How to get Rs 8 crore corpus with just Rs 7,000 monthly investment?
What is SIP?
A systematic investment plan(SIP) is an investment scheme in which you can invest a fixed amount in mutual funds (s). You can invest daily, weekly, monthly, quarterly, or yearly, depending on your choice. Plus, you can start your investment journey with a small amount of Rs 100.
What is compounding?
The power of compounding simply means that when you invest your money, it generates returns not only on the amount you initially invested but also on the profits the investment makes in the long run. The longer you stay invested the greater profit you get in the long run.
Why should you go for early investment?
To get maximum returns from investment in the long run, one should start investing early. Check out the example given above in the introduction part to understand why investing early is worthwhile.
SIP calculation conditions
- Target corpus: Rs 1 crore corpus
- Monthly investment: Rs 3,000
- Annualised return: 12 per cent
How long will it take to generate Rs 1 crore corpus with Rs 3,000 monthly SIP?
It will take approximately 31 years to generate over Rs 1 crore.
How much can Rs 3,000 monthly SIP build in 10 years?
The investment amount will be Rs 3,60,000, the capital gains will be Rs 3,12,108, and the estimated retirement corpus will be Rs 6,72,108.
How much can Rs 3,000 monthly SIP build in 20 years?
The investment amount will be Rs 7,20,000, the capital gains will be Rs 20,39,572, and the estimated retirement corpus will be Rs 27,59,572.
How much can Rs 3,000 monthly SIP build in 30 years?
The investment amount will be Rs 10,80,000, the capital gains will be Rs 81,62,920, and the estimated retirement corpus will be Rs 92,42,920.
How much can Rs 3,000 monthly SIP build in 31 years?
The investment amount will be Rs 11,16,000, the capital gains will be Rs 92,74,369, and the estimated retirement corpus will be Rs 1,03,90,369.
DISCLAIMER: Investments carry risk; seek professional guidance
