SIP Calculation: Investing prudently is a key to developing wealth over the long haul, and SIPs in mutual funds have turned out to be one of the most effective means of attaining financial goals. SIPs provide a systematic strategy to grow your funds without any hassle and, hence, sometimes reap good returns.
This post dissects the return of an SIP of ₹45,000 invested monthly over time towards building up ₹1 crore. It also takes us through the calculations, expected returns, and all the factors that play a role in determining how much you can grow your investment.
What is SIP? A Smart Investment Strategy
Most of the investors do not invest through SIPs, as they feel that there is some risk associated or they have no clear understanding of the concept. However, SIP (Systematic Investment Plan) is a plan of investing in mutual funds, which includes such contributions in fixed amounts at regular intervals (monthly, quarterly, etc).
What Amount to Invest to Reach ₹1 Crore?
The magic that makes an investment fruitful through SIP is in compound interest, whose monthly requirements for investment are different from one person to another, subject to their expected rate of return.
Scenario 1: 12% Annual Return
- Assuming a 12% annual return on investment, the
- The monthly SIP investment required will be ₹45,000.
Duration of Investment: 10 years
Expected Maturity Value: ~₹1 crore
How the calculation works here:
Total Investment: ₹45,000 × 12 months ×10 years = 54 lakhs
Estimated Returns: ₹46 lakhs, growth happening through compounding
Final Corpus: 1 crore
Scenario 2: For a 15% annual return
- Monthly SIP investment: Rs 39,000
- Duration of Investment: 10 years
- Expected Maturity Value:₹1 crore
Calculation
- Total Investment: ₹39,000 × 12 months × 10 years =Rs. 46.8 lakhs
- Estimated Returns: Rs. 53.2 lakhs of compounding growth
- Final Corpus:₹1 crore
Note: Returns are subject to market risks, taxes, and expense ratios. Past performance is no guarantee of future results.
Is SIP the Ideal Investment Option for You?
Although they have a lot of growth potential, SIPs also carry market risk. Here are ways you’d make informed decisions:
Diversify Portfolio: Complement your SIPs with safe investments like PPF, FD, or debt funds to balance out risk. Gauge your exposure to moderate risk with hybrid or multi-asset funds.
Invest for the Long Haul: Don’t be scared off by temporary downturns in the market.
Investing in SIPs for the long haul (10 years+) will usually yield better profits.
Review & Realign SIPs at Regular Intervals: Increase your SIP if you get a raise.
Review fund performance every year and change if required.
Final Thoughts
On that note, stay early, stay regular: If your goal is to reach that magical number, keep your SIP to ₹45,000 per month, and it should take you close to 10 years at 12% returns to achieve this goal.