Power of Compounding: How soon will monthly SIP of Rs 6,000, Rs 8,000, Rs 10,000 reach Rs 5 crore corpus target?
Investing Rs 6,000 - 10,000 in mutual funds through a systematic investment plan (SIP) can help individuals build Rs 5 crore retirement corpus. Let’s understand how.
Achieving financial independence often feels like a distant dream. But the power of compounding, combined with disciplined investing through systematic investment plans (SIPs), can turn that dream into reality. It can be one of the most effective ways to build a corpus that can help the individual achieve their financial goals. For example, if you start investing Rs 6,000 to Rs 10,000 in monthly SIP, investors can reach the corpus goal of Rs 5 crore. Here is the guide that can help you achieve this milestone.
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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 SIP and compounding
A SIP allows investors to invest a fixed amount either daily, weekly, monthly, half-yearly, or yearly. Through the power of compounding, the amount invested grows gradually. It generates earnings not only on the original principal amount but also on the accrued earnings. Compounding works best when you start early, stay consistent, and give your investments enough time to grow.
Why choose SIP?
SIP is a disciplined approach to investing. It allows investors to invest small amounts regularly in mutual funds which can help them achieve their financial goals.
Benefits of SIP
Affordability: Begin with as little as Rs 100 monthly.
Flexibility: Increase or decrease your SIP amount as needed.
Long-term growth
Impact of starting early
If you start investing at age 25 with Rs 6,000 monthly, you can reach an estimated Rs 5 crore by approximately 55 years of age. However, starting at 35 would require either a higher SIP amount or a longer investment period. This highlights why beginning early is important to take full advantage of compounding.
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 short term financial goals.
It can be beneficial for salaried employees.
How soon can investors reach Rs 5 crore corpus?
With Rs 6,000 monthly SIP
Target corpus: Rs 5 crore
At 12% return: Approximately 38 years.
With Rs 8,000 monthly SIP
Target corpus: Rs 5 crore
At 12% return: Approximately 35 years.
With Rs 10,000 monthly SIP
Target corpus: Rs 5 crore
At 12% return: Approximately 33 years.
Let’s understand the calculation.
From Rs 6,000 monthly SIP to Rs 5 crore corpus at 12 per cent annualised return
It will take approximately 38 years to achieve the target of Rs 5 crore retirement corpus. During that time, the investment will be Rs 27,36,000, the estimated capital gains will be Rs 5,32,84,415 and the estimated retirement corpus will be Rs 5,60,20,415.
From Rs 8,000 monthly SIP to Rs 5 crore corpus
It will approximately take 35 years to achieve the target of Rs 5 crore corpus. During that time, the investment will be Rs 33,60,000, the estimated capital gains will be Rs 4,86,02,153 and the estimated retirement corpus will be Rs 5,19,62,153.
From Rs 10,000 monthly SIP to Rs 5 crore corpus
It will take approximately 33 years to achieve the target of Rs 5 crore corpus. During that time, the investment will be Rs 39,60,000, the estimated capital gains will be Rs 4,69,79,981 and the estimated retirement corpus will be Rs 5,09,39,981.