SIP 555 Formula: Rs 2K step up SIP can make over Rs 1 cr; Rs 10K step up SIP can make over Rs 5 crore; know how

SIP Mutual Fund Tips: When one thinks of retirement, they envision a huge retirement fund that can give them peace of mind and financial freedom in old age. However, many people think that they need to save and invest a huge amount every month to achieve their financial goals.

While a significant monthly investment can help you create a good corpus in the long run, the same is possible if you invest a small amount in a disciplined manner in the long run.

555 Formula for mutual fund investment in SIPs works on the same pattern.

It helps you get good returns in the long run and also helps you achieve financial freedom before your retirement age starts. Know how — 

What is 555 Formula?

In 555 Formula, you start your investment journey at the age of 25; invest money for the next 30 years; increase your investment money by five per cent every year; and retire at 55.

This strategy of continuously increasing investment by 5 per cent for 30 years is called 555 Formula.

By adopting this strategy, you too may get returns of more than Rs 1 crore starting with just a Rs 2,000 investment.

How to become crorepati with Rs 2000 investment

Let's take the example of becoming crorepati by adopting 555 Formula.

You need to start a mutual fund investment of Rs 2,000 through SIP at the age of 25.

Every year, you need to increase your investment money by five per cent and continue it for 30 years.

If you get an average return of 12 per cent in those 30 years, your total investment during that duration will be Rs 15.95 lakh.

Your estimated capital gains will be Rs 89.52 lakh and your total returns in 30 years will be Rs 1.05 crore.

It means that even if you decide to retire at 55, you will have a retirement fund of Rs 1.05 crore.

What you may get with 5,000 investment?

Since Rs 2,000 is a small amount and you decide to start your investment journey with a Rs 5,000 monthly investment and step up your monthly SIP by five per cent, your total investment at the rate of 12 per cent return in 30 years will be Rs 39.86 lakh, the estimated capital gains will be Rs 2.24 crore, and the estimated returns at the age of 55 will be Rs 2.64 crore. 

How to get Rs 5 crore through 555 formula

Here, you have to start your investment with a Rs 10,000 monthly SIP and increase it by five per cent every year.

By doing that, your investment in 30 years will be Rs 79.73 lakh, and the estimated gains at the rate of 12 per cent return in 30 years will be Rs 4.48 crore.

The estimated returns after 30 years will be Rs 5.27 crore.

It means that by 55, you can aspire to create a corpus of over Rs 5 crore and achieve financial freedom.