Can Rs 5,000 monthly SIP investment help 40-year-old get Rs 8.18 crore retirement corpus? See calculations to know
Power of Rs 5,000 monthly SIP: A Rs 5,000 monthly SIP investment may appear to be a small amount for many, but even if one maintains consistency with that investment, it can help them create a multi crore retirement corpus.
SIP returns, compouding returns, power of compouding, power of SIP: A Rs 8.18 crore corpus with just Rs 5,000 monthly SIP investment for a 40-year-old. It may sound surreal, but if an mutual fund SIP investment is done meticulously, it is possible to achieve that retirement corpus target. However, not on their own, a person, with the help of their parents or guardians, can achieve the target by 40 if the rate of annualised return on the investment is 13 per cent.
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(Disclaimer: This is not investment advice. Do your due diligence or consult an expert for financial planning.)
How one can plan it
If one starts their investment journey early in life and does it consistently, they can create a large corpus even if they start investing with a small monthly amount. But a late beginner either has to invest a large amount or has to invest till a ripe age to achieve the same retirement corpus target.
How it becomes possible
It is possible because in mutual fund SIP investment, one gets the advantage of compounding. Since they invest a fixed amount at a fixed investment cycle and purchase net asset value (NAVs) at different rates, they get different numbers or units. If they stay for a long time in their investment, they get more compounding on their SIP investment.
How it helps in creating retirement corpus
If one starts with a small monthly investment, the compounding starts showing its impact after a few years, but once they stay in this investment for 15 years or over, compounding shows more impact. As a result, the accumulated corpus rises faster.
How Rs 5,000 SIP can give Rs 8.18 cr corpus to 40-year-old
The investment will be started by the parent/guardian at the person's birth. Once the person attains 25 years of age and starts earning, they take over this investment and continue investing for the next 15 years. So, the total number of investment years will be 40. The investment will be in the direct growth plan of an equity mutual fund, where the expected rate of annualised return will be 13 per cent. Here's how a Rs 5,000 monthly SIP investment will pan out in 10, 20, 25, 30, and 40 years.
Corpus from Rs 5,000 monthly corpus in 10 years
In 10 years, the investment will be Rs 6,00,000, expected capital gains will be Rs 6,33,403, and the expected value will be Rs 12,33,403.
Corpus from Rs 5,000 monthly corpus in 20 years
In 20 years, the investment will be Rs 12,00,000, expected capital gains will be Rs 45,27,596, and the expected value will be Rs 57,27,596.
Corpus from Rs 5,000 monthly corpus in 25 years
In 25 years, the investment will be Rs 15,00,000, expected capital gains will be Rs 98,57,175, and the expected value will be Rs 1,13,57,175.
Corpus from Rs 5,000 monthly corpus in 30 years
In 30 years, the investment will be Rs 18,00,000, expected capital gains will be Rs 2,03,03,234, and the expected value will be Rs 2,21,03,234.
Corpus from Rs 5,000 monthly corpus in 35 years
In 35 years, the investment will be Rs 21,00,000, expected capital gains will be Rs 4,05,15,920, and the expected value will be Rs 4,26,15,920.
Corpus from Rs 5,000 monthly corpus in 40 years
In 40 years, the investment will be Rs 24,00,000, expected capital gains will be Rs 7,93,71,694, and the expected value will be Rs 8,17,71,694.