Power of Compounding: How your Rs 5,000 monthly SIP can help build Rs 7.44 cr retirement corpus; see calculations

Power of Compounding: Planning for retirement amid rising inflation and the escalating cost of living can be challenging. However, leveraging the power of compounding through a Systematic Investment Plan (SIP) can transform a modest monthly investment into a substantial retirement corpus. By starting a monthly SIP of Rs 5,000 at age 25, you could potentially accumulate over Rs 7.4 crore by retirement. Explore how this disciplined approach can help you achieve financial freedom and secure your retirement.

How to build a Rs 7 crore corpus if you start investing at the age of 25 years: Calculation

At age 25, with 35 years until retirement, investing Rs 5,000 per month in an SIP could build a corpus of Rs 7.43 crore. For comparison, starting at age 20 with a monthly investment of just Rs 2,500 would also reach this target over the same period. However, at age 25, you need to invest more to achieve the same goal. Here’s how:

Assuming a monthly investment of Rs 5,000 in an SIP for 35 years with an annualised return of 15 per cent, your total investment would be Rs 21,00,000. Over this period, with the power of compounding, your estimated long-term capital gain would be Rs 7,22,03,225, bringing the total value of your investment to Rs 7,43,03,225.

Invested Amount: Rs 21,00,000
Estimated Capital Gain: Rs 7,22,03,225
Total Value: Rs 7,43,03,225

Power of Compounding

Investing in mutual funds through SIPs generally carries less risk compared to directly buying stocks. With average returns of around 15 pr cent, SIPs tend to outperform many government schemes. The power of compounding significantly enhances your investment growth over time, making long-term SIPs an excellent strategy for wealth creation.

(Disclaimer: This is not investment advice. Calculations are projections. Please do your own due diligence or consult an advisor for retirement planning.)