Power of Compounding: An SIP in mutual funds is an investment option linked to the stock market that helps investors to generate a substantial corpus in the long term. It offers a 12 per cent average capital gain return and uses the power of compounding to generate interest on interest. Investors can invest small amounts periodically instead of lump sums.
SIP: Key Features
- Generally offers a 12% annual return (average).
- Power of compounding
- Rupee cost averaging
- Risk tolerance
In this write-up, we will calculate how much corpus you can generate in 20 years with a Rs 9,999 monthly SIP investment, assuming an average return rate of 12 per cent.
So, how much corpus can one generate in 20 years if he/she invest Rs 9,999 monthly SIP?
According to the calculations, you can generate over Rs 91 lakh corpus with a Rs 9,999 monthly SIP investment in 20 years.
Build over Rs 91 lakh with Rs 9,999 monthly SIP: Calculating average investment
In 20 years, you will invest a total of Rs 23,99,760.
Build over Rs 91 lakh with Rs 9,999 monthly SIP: Calculating average capital gain
In terms of capital gain, a total of Rs 67,97,894 will be received. It should be noted that this is an expected return, and the actual amount may vary depending on the market condition.
Build over Rs 91 lakh with Rs 9,999 monthly SIP: Final Corpus Received
Consequently, at the end of 25 years, including the principal investment and capital gain, you will get a total of Rs 91,97,654.
Full Calculation: You become the owner of Rs 4.2 crore after 25 years
- Total Investment Amount: Rs 23,99,760
- Capital Gains: Rs 67,97,894
- Total Approx. Return: Rs 91,97,654
(Disclaimer: Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning.)
