Power of Rs 2,000 Monthly SIP: Can one achieve Rs 3.18 crore corpus by investing Rs 2,000 monthly? If yes, in how many years
Power of Rs 2,000 Monthly SIP: Starting with a small monthly SIP and creating a gigantic retirement corpus may appear to be an uphill task, but it can be achieved if one sticks to their investment for a long time.
Power of Rs 2,000 Monthly SIP: Start investing early has its own benefits. Even if one starts with a small monthly amount, gets average returns, and sticks to regular investment for a long time, they can create a large corpus. It happens because in certain investments, investors get compound growth. Duration of investment plays an important role in creating a large corpus.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
How one can achieve that
One can achieve that through fixed interest investments that offer compound interest, or market-linked investments, where there is no limit to return. Among market-linked options, a mutual fund systematic investment plan (SIP) can be a good option.
Why SIP?
SIP investment is market-linked, but it can be started with a small amount, such as Rs 100. Many high-performing mutual fund schemes offer a minimum SIP investment of Rs 500. With such a low minimum investment, people with low incomes can also start investing through an SIP.
Other advantages of SIP investment
One can increase the SIP investment amount with a rise in their income. If they are facing financial crunches, they can stop the SIP and restart once they get their investment capacity back. If they want, they can also opt for a step-up SIP, where they can increase the investment amount every year.
How SIP investment work
When one invests through SIPs, they purchase a certain number of net asset value (NAV) units in a mutual fund scheme. Since the price of NAV keeps changing every day, they buy a different number of NAVs every investment cycle. So, even if the mutual fund scheme is not performing well for a long time, the tactic of buying NAVs at different rates provides rupee cost averaging and helps lessen the impact of deficit. In the long run such as 7 years and above, SIP investment is most likely to bring positive results.
How compounding works
As the price of NAV rises, the older it gets, the higher the benefits it gives to the holders. So, in the long run, when you buy NAVs at different prices, compounding works faster, and investment grows faster with time.
How Rs 2,000 monthly SIP can work
Many people can easily start a Rs 2,000 monthly SIP. If their income rises, they can increase the amount, but for our calculation, we are assuming that they will not increase their investment amount. A Rs 2,000 monthly SIP investment will not show magical results in the short term, but in the long term, it can balloon to a large corpus.
SIP calculations
For our calculation, we will show Rs 2,000 monthly SIP investment in a mutual fund scheme, where the annualised return will be 13 per cent. We will show how that investment will grow in 10, 20, 30, and 40 years.
Corpus from Rs 2,000 monthly SIP in 10 years
In 10 years, the invested amount will be Rs 2,40,000, estimated capital gains will be Rs 2,53,361, and the estimated total value will be Rs 4,93,361.
Corpus from Rs 2,000 monthly SIP in 20 years
In 20 years, the invested amount will be Rs 4,80,000, estimated capital gains will be Rs 18,11,038, and the estimated total value will be Rs 22,91,038.
Corpus from Rs 2,000 monthly SIP in 30 years
In 30 years, the invested amount will be Rs 7,20,000, estimated capital gains will be Rs 81,21,294, and the estimated total value will be Rs 88,41,294.
Corpus from Rs 2,000 monthly SIP in 40 years
In 40 years, the invested amount will be Rs 9,60,000, estimated capital gains will be Rs 3,17,48,677, and the estimated total value will be Rs 3,27,08,677.