SIP: How saving Rs 100 a day can help you build wealth of over Rs 1 crore; get calculations

SIP: An ocean is formed drop by drop; a citadel is built brick by brick; and a milestone is achieved step by step. But when you see just a drop, a brick, or a small step, it looks nearly impossible to achieve large goals with such small units. This is what happens when we hear that a large corpus can be built with small savings every day or little investments every month. We start imagining how a small investment every month can create a large corpus.

As a result, many of us drop the idea of saving and investing. But small savings have their own magic.

Like a drop, a brick, or a step, when they unite, they create a gigantic retirement corpus that can run into several crores. 

Likewise, if you save Rs 100 a day and invest that money in a market-linked investment plan such as a mutual fund through the systematic investment plan (SIP), in the long-term, you can easily create a large retirement corpus. And that too, even if you get a 12 per cent annual return on your investments. What does Rs 100 saving mean?

Rs 100 saved a day means Rs 36,500 saved a year, or Rs 3,041.66 a month. 

Is saving Rs 36,500 a big deal? 

A financial rule says that you should save at least 20 per cent of your monthly income.

If your monthly saving is Rs 3,041.66, it means someone drawing a salary closer to Rs 15,500 a month can save that money.

If your salary is more than Rs 15,500 a month, you can save more money. But let's keep your benchmark of saving Rs 3,041.66 a month.

What can a Rs 3,041.66 monthly savings do for you?

Let's assume that you save Rs 3,041.66 a month and invest that amount in mutual funds through SIP.

If you get a 12 per cent return on that investment, your expected amount in 15 years will be Rs 15,34,416, while your total investment by that time will be Rs 5,47,380.

Your long-term capital gains will be Rs 9,87,036. 

However, the real magic of SIP compounding growth starts after 15 years of investment. 

What Rs 3,041.66 monthly investment will give you in 20 years?

Now, we take this investment forward to another five years, i.e., a total of 20 years.

At this stage, your expected amount will be Rs 30,38,409, while your investment will be Rs 7,29,840. It means long-term capital gains will be Rs 23,08,569. 

What Rs 3,041.66 monthly investment will give you in 25 years?

After 20 years, your investment grows faster.

After 25 years, your investment will be Rs 9,12,300, but your long-term capital gains will be Rs 48,58,408.

It means your expected amount will be Rs 57,70,708.

What Rs 3,041.66 monthly investment will give you in 30 years?

After 30 years, your Rs 100 saving a day, or Rs 3,041.66 investment a month, can help you achieve crorepati status.

Here's what your mutual fund investment would look like: Your total investment will be 10,94,760, but your long-term capital gains will be Rs 96,39,708 and your expected wealth will be Rs 1,07,34,468. 

Now, 30 years is a long time. But if you start investing early, i.e., at 25 years, you can build a corpus of over Rs 1 crore by the time you reach 55 years, and that too with just Rs 100 saving a day or Rs 3,041.66 monthly investment.

(Mutual fund investments are subject to market risk. Do your due diligence before making an investment.)