Power of Compounding: How many years it will take to reach Rs 2 crore corpus if your monthly SIP is Rs 3,000, Rs 4,000, or Rs 5,000

To experience the power of compounding, one must start investing early and they would be able to gather a large sum of money at the retirement age. But it is rightly said it is never too late to start investing. Therefore, today we will talk about how long it will take to reach Rs 2 crore retirement corpus if your monthly SIP is Rs 3,000, Rs 4,000, or Rs 5,000.

Anamika Singh | Oct 30, 2024, 12:46 PM IST

Most of us might be aware of compound interest as we have read about it in our school. But who would have guessed that the power of compounding can majorly impact the lives of investors? The knowledge of compounding can enable an investor to gather a large corpus through a small monthly investment if their investment horizon is long. It can provide them with financial freedom that can help them achieve many of their life’s financial goals. Thus, let’s understand how long will it take for investors to reach Rs 2 crore retirement corpus with a monthly SIP investment of Rs 3,000, 4,000, and 5,000.

Photos Source: Pixabay/Representational

(Disclaimer: Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning)

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Power of compounding

Power of compounding

The power of compounding is the process of earning interest on interest, that is the amount of money you invest will generate earnings from both the principal amount and the accrued earnings of compounding periods. The greater the number of compounding periods, the greater the compound interest growth. However, in equity SIP, you don’t get a fixed interest. Here, you get annualised returns, which, when compounded for the long term, increase the value of your investment.  

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What is SIP

What is SIP

A Systematic Investment Plan (SIP) is an investment that allows investors to invest a fixed amount in a mutual fund scheme at regular intervals. The investment in SIP can be done daily, weekly, monthly, quarterly, or half-yearly, yearly. 

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Compound interest: Start saving early

Compound interest: Start saving early

One must start investing early in their life or professional career to make the most of the power of compounding. If you put your money into an investment plan as soon as you start earning, you can enable your savings to grow significantly over time. 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.

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Benefits of compounding

Benefits of compounding

Your savings can grow faster
Long-term growth
Reduces risk
Encourages long-term planning

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How does power of compounding work?

How does power of compounding work?

There are several investment options where the power of compounding is used and the interest earned is credited to your invested funds. For example, suppose you invest an amount of money such as Rs 100, you get a return at a 5 per cent interest rate on it. Now, in the next compounding cycle, the return will be calculated at Rs 105 instead of Rs 100. 

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

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

It will take approximately 36 years to achieve the target of Rs 2 crore retirement corpus. During that time, the investment will be Rs 12,96,000, the estimated long-term capital gains will be Rs 2,06,99,523 and the estimated retirement corpus will be Rs 2,19,95,523. 

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

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

It will approximately take 33 years to achieve the target of Rs 2 crore corpus. During that time, the investment will be Rs 15,84,000, the estimated long-term capital gains will be Rs 1,87,91,992 and the estimated retirement corpus will be Rs 2,03,75,992. 

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

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

It will take approximately 32 years to achieve the target of Rs 2 crore corpus. During that time, the investment will be Rs 19,20,000, the estimated long-term capital gains will be Rs 2,06,26,485 and the estimated retirement corpus will be Rs 2,25,46,485. 

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Power of Compounding: Putting it into practice

Power of Compounding: Putting it into practice

You can use these rules to grow your money and achieve financial success. By being consistent with your investments and seeking expert advice, you can make the most of your mutual fund investments.

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