It is a myth that for SIP investments you need to save a large sum of amount. You can start SIP 5000 per month in any of the suitable funds to build a corpus of Rs. 1 crore over a span of 20 years. A lot of people have a false notion that investing a small amount even on a regular basis will not help in building the desired corpus.
Guaranteed Tax SavingsUnder sec 80C & 10(10D)^
₹1 CroreInvest ₹10k Per Month*
Zero LTCG TaxUnlike 10% in Mutual Funds
It is believed that investing a small amount periodically will not help in meeting your long-term goals. For this reason, many people continue to defer their investments indeterminately.
But if they try and compare it, they will be surprised to know that by starting a SIP of Rs. 5000 per month they would be able to become a Crorepati over a span of 20 years. SIPs make one of the most sensible investment methods to build a large corpus by investing small amounts. Furthermore, with Rupee cost averaging it minimizes the impact of market fluctuations on your SIP investment.
The returns offered in Equity funds are potentially superior in comparison to other asset classes. The market risk is higher but if you stay invested for a longer duration of 10 to 20 years, then you can benefit from superior returns. And some of the funds are historically known to offer inflation beating-returns that help you meet your majority of long-term goals like children’s education, house, marriage, retirement, etc.
And if you also want to achieve your future goals in the stipulated time then it makes sense to start a sip every month in equity funds. Moreover, if you invest in Equity Linked Saving Schemes (ELSS) then you can also avail tax-benefits on the invested amount.
You can begin with a small amount like Rs. 500 to start your SIP, and with a continuous SIP of Rs. 5000 per month for tenure of 20 years or so you can build a corpus of Rs. 1 Crore. You can easily compare different SIP schemes online and check out various mutual fund portfolios. You can pick a portfolio as per the investment amount, risk appetite and historical returns that the fund house has been offering. It is suggested to go with a portfolio tnat manages to offer an annual return of 12 percent; you would be able to create a corpus of nearly Rs. 1 Crore in around 25 years.
SIP is one of the most suitable methods to inculcate the saving attitude and discipline among the investors, as the SIP amount automatically gets deducted from the bank account. As the money gets deducted on a fixed date from the investor's savings bank account, there is no need to remember the date and make the payment. It eliminates the risk of missing out on SIP investments.
Furthermore, it brings discipline in the investment approach as you are investing a fixed sum regularly without fail investments, which helps in building wealth over the long term. For example, if you start a SIP of 5000 per month for a period of 21 years and the payment date is 5th of every month. Then the bank will deduct the same amount on the 5th of every month and you will receive an update from the fund house for your SIP 5000 per month.
The best part is that it is not essential to invest a huge amount like Rs. 20,000 or more as the case is in other traditional investment methods like bank FDs and RDs to accumulate a substantial amount. You wish to invest in mutual funds to become a Crorepati then you can start a SIP of 5000 per month and choose longer tenure to gather the required amount.
You can also use a sip calculator to have an idea about the rate of return and the expected corpus from your investment amount and the duration of the investment. You can even choose to invest Rs. 500 or Rs. 1000 but then you will have to increase the investment tenure if you wish to become a Crorepati.
SIPs work on the approach of Rupee cost averaging in which a fixed amount is invested regularly for a certain duration. Generally, we tend to invest when markets are high and sell when the market is low. But it should not be this way. With Rupee Cost Averaging you end up buying lesser shares of an investment when prices hike and more shares when the prices are low.
Because SIP is a periodic investment some of the amount is invested when the market is high and some when the market is low, which eventually averages out the costs because you earn more units at low market scenarios and vice versa, which is termed as rupee cost averaging. Simply put, you don't need to worry about timing the market and market fluctuations.
As you can start your SIPs with small amounts like Rs. 500 or SIP 5000 per month, therefore it is not required to accumulate a large sum of money before you start investing. The power of compounding helps in exponentially growing your wealth. The profit earned is added to the principal amount, which is then reinvested to accelerate the process of profit earning.
Let's say, you invest a sum of Rs. 2000 at 10% annual interest. So, the investment amount here becomes Rs. 2200 after one year, then Rs. 2420 in the second year and so on. and with a SIP of 5000 per month, you may become a Crorepati with the compounding effect.*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Even if you cannot start with a big amount, you can still make it Rs. 1 Crore with a SIP of 5000 per month. It can be achieved by gradually increasing your SIP 5000 per month with an increase in your income. Here is how you can do that!
You can simply increase your SIP of 5000 per month by a certain percentage. Start with a small amount and increase is later on at a regular interval.
For example, if you start a SIP of 5000 per month and you can increase your SIP allocation by 10% every year. So, in the first year you start SIP of 5000 per month, and increase it to SIP of 5500 per month in the second year i.e. (Rs. 5,000+10% of 5,000), in the third year it will be Rs. 6,050 i.e. Rs 5,500 + 10% of 5,500 and so on.
And assuming an annualized rate of return of 12% you can meet your target corpus of Rs. 1 Core if you stay invested for 21 years on your equity investments then you can make it to a Crore with a SIP of Rs. 5500 per month. and if your investment horizon is 30 years then a monthly SIP of Rs. 2900 will help you reach the target sum.
Now, if you want to become a crorepati in a span of 20 years with your SIP investment then you can invest Rs. 5500 per month in a SIP and increase the SIP amount every year by 9%. it helps in creating a higher corpus as illustrated below.
If someone begins a SIP of 5000 per month for a span of 20 years, at 12% assumed annualized rate of return per annum, your total investment in 20 years is Rs. 12 lakh and the accumulated corpus at the end of tenure is close to Rs. 50 lakhs. And with a 10 percent increase in the SIP amount with a total invested amount of Rs. 34. 36 lakh the corpus at the end of 20 years will be nearly 1 Crore rupees.
You can always track the performance of your fund house regularly, though in SIPs it is suggested to stay invested for a longer tenure to benefit from the power of compounding and rupee cost averaging as discussed above. But if your schemes fail to perform over the years, you can always examine and switch to another fund of you are not satisfied.
To save a sum of Rs. 1 crore or Rs. 5 crores or more, the key is to invest save and invest regularly and use the potential of SIPs in equity funds to make your dream of becoming a Crorepati a reality.
Long Story Short
As you can see by starting small you can increase your SIP by a certain percentage in the later years. Before starting your SIP of 5000 per month make sure that you choose a fund house that allows increasing your SIP amount every year. you can also use SIP online calculators to check how much you should increase and by what percentage to reach the desirable corpus over some time.
*All savings are provided by the insurer as per the IRDAI approved
insurance plan. Standard T&C Apply
Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^10(10D) Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.
Expected Rate of Return (Yearly)
01 Dec 2023AMC SIP stands for Asset Management Company Systematic
10 Oct 2023Extended Internal Rate of Return (XIRR) is a key metric used in
26 Sep 2023A Systematic Withdrawal Plan (SWP) Calculator is a financial
18 Sep 2023XIRR, or Extended Internal Rate of Return, is a powerful
29 Aug 2023Index Fund SIP (Systematic Investment Plan) Investment has