Power of Compounding: How early can Rs 4,000, Rs 5,000, and Rs 6,000 monthly SIP build Rs 3 crore corpus at 12% annualised return?
What if we say, investors can build a large corpus of Rs 3 crore by investing Rs 4,000, Rs 5,000, or Rs 6,000 on a monthly systematic investment plan (SIP)? Yes, you heard that right. Regardless of age and income, anyone can build a retirement corpus or achieve their financial goal through SIP, with minimal impact on their monthly budget. Let’s understand how.
People often overlook the potential of small investments, believing that building a sizable retirement corpus requires large sums. While investing more can indeed accelerate growth, many find reasons like budget constraints to delay or avoid starting. Here, we will discuss, why starting early matters and how an investor can achieve Rs 3 crore retirement corpus with a monthly systematic investment plan (SIP) of Rs 4,000, Rs 5,000, or Rs 6,000.
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(Disclaimer: Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning)
Power of compounding
“The earlier the better”, the investors must start investing early to experience the strong impact of compounding. It makes your money grow faster as your investment grows older. Even small consistent investments can lead to large wealth over the years. The power of compounding is often used in retirement savings, investments, and other long-term financial goals. It can be a vital factor in increasing wealth over time.
Start early
Every financial journey begins with a single step. Even the smallest investments can grow to a huge amount to help you meet your financial goals. Therefore, one must start investing early in their life. To support your investment purpose, SIP allows a minimum monthly investment starting with Rs 100, but it can vary depending on the mutual fund scheme.
Introduction to SIP
If you are planning a retirement corpus, saving for a child’s future, or building a corpus for future needs, a systematic investment plan (SIP) is suitable for all your financial needs. It is a process of investing in a mutual fund with a fixed amount, either daily, weekly, monthly, or yearly.
Benefits of compounding
Your savings can grow faster
Long-term growth
Reduces risk
Minimal impact on monthly budget
SIP allows investors to start investing with a relatively small amount, often as low as Rs 100 per month. Unlike, lump sum investments, which require a one-time payment, SIP spreads the investment over time. It minimises financial pressure on investors and also helps to save for large expenses and financial goals.
Ideal for long-term goals
SIP inculcates a disciplined saving habit, which is essential for achieving long-term financial goals. It can be useful to align with specific long-term goals, such as buying a home, funding children’s education, or planning for retirement.
Suitable for all ages
SIPs are ideal for families looking to save for their children’s education or marriage.
Even retirees can benefit from SIPs as a means of managing their post-retirement finances.
For young investors, SIPs offer a great way to start building wealth early.
For those in the workforce, SIPs provide a flexible investment option that can be easily integrated into monthly budgets.
From Rs 4,000 monthly SIP to Rs 3 crore corpus at 12 per cent annualised return
It will take approximately 37 years to achieve the target of Rs 3 crore retirement corpus. During that time, the investment will be Rs 17,76,000, the estimated long-term capital gains will be Rs 3,13,22,046 and the estimated retirement corpus will be Rs 3,30,98,046.
From Rs 5,000 monthly SIP to Rs 3 crore corpus
It will approximately take 35 years to achieve the target of Rs 3 crore corpus. During that time, the investment will be Rs 21,00,000, the estimated long-term capital gains will be Rs 3,03,76,345 and the estimated retirement corpus will be Rs 3,24,76,345.
From Rs 6,000 monthly SIP to Rs 3 crore corpus
It will take approximately 33 years to achieve the target of Rs 3 crore corpus. During that time, the investment will be Rs 23,76,000, the estimated long-term capital gains will be Rs 2,81,87,989 and the estimated retirement corpus will be Rs 3,05,63,989.