From Rs 1,100 SIP to Rs 11 lakh fund: How it can be created
Systematic Investment Plan (SIP) is a popular method for mutual fund investment. An investor with low monthly earnings can also start investing through SIP. Since SIP provides compound returns, one's small investment over a long period can help one create a huge corpus.
From Rs 1,100 SIP to Rs 11 lakh fund: How it can be created: Systematic Investment Plan (SIP) is an investment method to invest in mutual funds. People with low income can also invest through SIP since some of the funds have a starting SIP of Rs 100. SIP provides compounding, so one can create a large corpus by staying in their investment for a long duration.
Here's how you can create Rs 11 lakh corpus with just Rs 1,100 monthly SIP.
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SIP Investment
SIP Investment
You need to pick a mutual fund(s) and start a monthly SIP of Rs 1,100. You may pick an equity fund or an index mutual fund for your investment.
Return on SIP investment
Return on SIP investment
We are estimating a 12 per cent annualised return on your investment. The benchmark Nifty 50 has given over 14% return in the 10 years.
SIP investment duration
You have to invest Rs 1,100 a month for 20 years. It means your total investment in 20 years will be Rs 264,000.
Journey to Rs 11 lakh
Journey to Rs 11 lakh fund
At 12% annualised return for 20 years, your estimated long-term capital gains will be Rs 835,063. Your estimated amount after 20 years will be 1,099,063 (nearly 11 lakh).
How compounding helps
How compounding helps
If you continue your Rs 1,100 SIP for 25 years, you will invest just Rs 70,000 extra in those five years, but your estimated amount will be Rs 2,087,399 (Rs 20.88 lakh, or nearly double of Rs 11 lakh).
Starting to invest early can do trick
Starting to invest early can do trick
The sooner you start, the longer you can invest. E.g. if you start at 25 years of age and invest Rs 1,100 a month in a SIP for the next 30 years. At a 12% annualised return, your estimated amount will be Rs 3,882,905 (Rs 38.80 lakh), while your investment will be just Rs 396,000 (Rs 3.96 lakh). It means at 55 years of age, you may have Rs 38.80 lakh corpus with a small contribution every month.