Power of Compounding: How fast can monthly SIP of Rs 3,000, Rs 4,000, and Rs 5,000 build Rs 2 Crore corpus?

Compound interest is something we got familiar with during our school days but who would have guessed that the power of compounding can impact the lives of investors? The right information and deep knowledge of compounding can help one generate a sizeable corpus in the long run. It requires patience, consistency, and disciplined investment. Irrespective of the amount, the power of compounding can do wonders. As discussed earlier even a small amount can make a big difference. In this context, we will find out how soon a monthly systematic investment plan (SIP) of Rs 3,000, Rs 4,000, or Rs 5,000 can help you build a retirement corpus of Rs 2 crore.

What is SIP?

A systematic investment plan (SIP) is an investment option in mutual fund (s) where one can start investing with a fixed amount. The amount can be as small as Rs 100. Investors can invest as per their choice, it could be daily, weekly, monthly, quarterly, or yearly. 

What is power of compounding?

The power of compounding is the process of generating earnings from both the principal amount and the accrued growth of compounding periods. The greater the number of compounding periods, the greater the compound earnings growth. 

Compound Interest: Start investing early

One must start investing early in their life to make the most of the power of compounding. If start investing the moment you start earning and stay consistent in the entire investment period, you can enable your investment to grow in the long run. The longer you remain invested, the faster your investment grows, since you allow your money to grow further because the power of compounding increases with time.

What are benefits of compounding?

It encourages long-term planning
Your investment can grow faster
Reduces risk

Power of Compounding: Calculation conditions

Target corpus: Rs 2 crore
Monthly investment: Rs 3,000, Rs 4,000, Rs 5,000
Annualised return: 12 per cent

How long it will take to build Rs 2 crore retirement corpus with Rs 3,000 monthly SIP

It will approximately take 36 years to generate Rs 2 crore.

From Rs 3,000 monthly SIP to Rs 2 crore corpus at 12 per cent annualised return

During that time, the investment will be Rs 12,96,000, the estimated capital gains will be Rs 2,06,99,523 and the estimated retirement corpus will be Rs 2,19,95,523. 

How long it will take to build Rs 2 crore retirement corpus with Rs 4,000 monthly SIP

It will approximately take 33 years to achieve the target of Rs 2 crore corpus.

From Rs 4,000 monthly SIP to Rs 2 crore corpus

The investment will be Rs 15,84,000, the estimated capital gains will be Rs 1,87,91,992 and the estimated retirement corpus will be Rs 2,03,75,992.

How long it will take to build Rs 2 crore retirement corpus with Rs 5,000 monthly SIP

It will take approximately 32 years to achieve the target of Rs 2 crore corpus.

From Rs 5,000 monthly SIP to Rs 2 crore corpus

The investment amount will be Rs 19,20,000, the estimated capital gains will be Rs 2,06,26,485 and the estimated retirement corpus will be Rs 2,25,46,485.