Power of Compounding: How long will it take to build Rs 5 crore corpus with Rs 7,000, Rs 9,000 or Rs 12,000 monthly investments?
Let’s find out how the power of compounding can help individuals build Rs 5 crore corpus with monthly investments of Rs 7,000, Rs 9,000, or Rs 12,000.
Power of Compounding: The power of compounding is a game changer in wealth creation. It can turn small, and consistent investments into good savings over time. For individuals aiming to build Rs 5 crore corpus, understanding the role of disciplined monthly investments and compounding is important. With Rs 7,000, Rs 9,000, or Rs 12,000 monthly systematic investment plan (SIP), the time required to achieve this retirement corpus varies. Therefore, in this article, we will explore how compounding can help grow growth, and we will also focus on the calculations of the time needed for each investment amount.
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
Photos: Representational
Power of Compounding: Assuming 12% annualised return
The growth of your SIP investment depends on the annualised return rate. Here, we will do the calculations on 12 per cent annualised returns on monthly SIP of Rs 7,000, Rs 9,000, or Rs 12,000.
How long will it take to achieve the target of Rs 5 crore with Rs 7,000 monthly SIP?
It will take approximately 36 years to achieve the target of Rs 5 crore retirement corpus. Thus, if you start investing at the age of 24, by the time you reach 60 you may achieve this target by that time.
From Rs 7,000 monthly SIP to Rs 5 crore corpus at 12 per cent annualised return
As per the calculations, the estimated retirement corpus will be Rs 5,13,22,888. During this time, the invested amount will be Rs 30,24,000, and the estimated capital gains will be Rs 4,82,98,888.
How long will it take to achieve the target of Rs 5 crore with Rs 9,000 monthly SIP?
It will take approximately 34 years to achieve the target of Rs 5 crore retirement corpus. Thus, if you start investing at the age of 26, by the time you reach 60 you may achieve this target by that time.
From Rs 9,000 monthly SIP to Rs 5 crore corpus at 12 per cent annualised return
The estimated retirement corpus will be Rs 5,17,75,685. During this time, the invested amount will be Rs 36,72,000, and the estimated capital gains will be Rs 4,81,03,685.
How long will it take to achieve the target of Rs 5 crore with Rs 12,000 monthly SIP?
It will take approximately 32 years to achieve the target of Rs 5 crore retirement corpus.
Thus, if you start investing at the age of 28, by the time you reach 60 you may achieve this target by that time.
From Rs 12,000 monthly SIP to Rs 5 crore corpus at 12 per cent annualised return
The estimated retirement corpus will be Rs 5,41,11,564. During this time, the invested amount will be Rs 46,08,000, and the estimated capital gains will be Rs 4,95,03,564.
Important Points to Remember About SIP Investment
It’s important to understand that SIPs are market-linked investments, meaning that returns are not guaranteed. The 12 per cent return mentioned in the above calculations is an estimate, and actual returns may vary depending on market conditions.
For example: Retirement Corpus at 13%, 14%, and 15% annualised return for 36 years with Rs 7,000 SIP investment
If your investments yield a 13 per cent return, your total could rise to Rs 6,79,87,778 after 36 years. Similarly, if your investments yield a 14 per cent and 15 per cent return, your total could rise to Rs 9,04,60,428 and Rs 12,08,38,073 respectively after 36 years.
What is compounding?
Compounding is the process through which an investment generates earnings that are reinvested to generate additional earnings in the following periods. Simply it means, that the amount you invest will generate earnings from both the principal amount and the accrued earnings of compounding periods.
What is SIP?
SIP stands for a Systematic investment plan that allows the investors to invest a fixed amount in a mutual fund scheme at regular intervals. The investment can be done - daily, weekly, monthly, quarterly, half-yearly, or yearly.
Start early
Time is your greatest helper when it comes to compounding. By starting early you give your investments more time to grow and multiply.
Benefits of compounding
Despite the risks associated with the market, SIP remains a popular method for wealth creation due to its benefits, such as rupee cost averaging. This strategy can help mitigate potential losses over the long run, though it's essential to be mindful of the inherent risks and plan accordingly.