Unveiling the Power of Rs 10,000 Monthly SIP: How to accumulate Rs 1 crore with compounding

Power of Rs 10,000 Monthly SIP: When we are on the path to creating wealth, our aim is to build a huge corpus. But the biggest hurdle that we find on the way to creating wealth is that we think we can't achieve that goal as our monthly investment is small. We think, how much will I accumulate even if I invest Rs 10,000 a month? Such thoughts sometimes discourage you from saving and investing that money. But you may be completely wrong. Even if you invest Rs 10,000 a month in mutual funds through a systematic investment plan (SIP), there are chances that you may accumulate a significant corpus of Rs 1 crore. Even though your investment in that period may be much less than the total gains that you get at the end of it, compounding your mutual fund investment helps your money grow faster. Here are expert calculations that shed light on the strategic approach needed to achieve your Rs 1 crore goal through SIPs-

Which investment strategy will help build Rs 1 crore corpus?

The 8-4-3 rule of compounding can be your way to achieve the Rs 1 crore corpus goal. Jiral Mehta, Senior Research Analyst, FundsIndia said that in this strategy, if you invest Rs 10,000 every month, assuming annual returns of 12 per cent, it takes 8 years to reach the Rs 16 lakh maturity amount. While you get your next Rs 16 lakh return in just four years (total 12 years), and similarly, the next Rs 16 lakh return in just three years.

At the end of the 20th year of your investment, your corpus will reach around Rs 1 crore. If you continue this investment for another 10 years, or a total of 30 years, your wealth will grow much faster.

Here's the full calculation:

What is the 8-4-3 rule?

The 8-4-3 rule is a concept used to illustrate the power of compound interest. It suggests that, with consistent investment and a high rate of return, your money can grow exponentially over time. Here's a breakdown of the 8-4-3 rule:

• 8-years: It represents the initial period where you steadily invest and accumulate a certain amount.
• 4-years: Due to compounding, your money grows at a faster pace in the following years. It takes only 4 years to accumulate the amount, which means half the time it took for the first.
• 3-years: The growth accelerates even further. In the next three years, you will accumulate the same amount as you did in the previous four years.