Power of Compounding: Can monthly SIP investment of Rs 7,000 help build corpus of Rs 4.5 crore? See in how many years it can be done
Power of Compounding: As a salaried employee, do you often think that buying a luxury car, a house, or accumulating a large corpus for post-retirement life is out of your reach? With daily expenses, these goals might seem unrealistic. But if you think so, you're mistaken. Accumulating a large sum, like Rs 1 crore or Rs 2 crore, is entirely achievable with the right investment strategy. However, these strategies require consistency and discipline.
(Disclaimer: This is not investment advice. Calculations are projections. Please do your own due diligence or consult an advisor for retirement planning.)
Best investment option to consider
So, what’s the best investment option to consider? One popular and effective choice available today is the Systematic Investment Plan (SIP) in mutual funds. By committing to regular monthly contributions, you can steadily accumulate a substantial corpus over time — without the need for a large lump sum upfront. Let’s see through calculations how you can build over Rs 4.5 crore with a monthly SIP of Rs 7,000:
Power of Compounding: Want to build over Rs 4.5 crore with Rs 7K monthly SIP?
If you want to build a corpus of Rs 4.5 crore with Rs 7,000 monthly SIP, then you have to plan and invest in SIP strategically. So, in how many years your investment will grow to Rs 4.5 crore corpus? Know through calculations -
Build Rs 4.5 crore with Rs 7,000 monthly SIP: If annualised return is 12%
To accumulate a corpus of Rs 4.54 crore, assuming an average return rate of 12 per cent, you need to invest for 35 years.
Build Rs 4.5 crore with Rs 7,000 monthly SIP: Calculating average investment
In 35 years, you will invest a total of Rs 29,40,000 i.e., Rs 7,000 per month.
Build Rs 4.5 crore with Rs 7,000 monthly SIP: Calculating average capital gain
Calculating the average expected return of SIP at 12 per cent, a total of Rs 4,25,26,883 will be received as a capital gain on this amount in 35 years.
Build Rs 4.5 crore with Rs 7,000 monthly SIP: Calculation to create a corpus of over Rs 4.5 crore
Consequently, at the end of 35 years, including the principal investment and capital gain, you will get a total of Rs 4,54,66,883.
Calculation - You become the owner of Rs 4.5 crore after 35 years
Total Investment Amount: Rs 29,40,000
Estimated Capital Gains: Rs 4,25,26,883
Total Approx. Return: Rs 4,54,66,883
Power of Compounding
SIP offers significant benefits, primarily due to the power of compounding. The longer the SIP duration, the greater the compounding benefits.
Benefits of SIP
With an average annual return of 15 per cent, SIPs offer substantial growth, outperforming many other investment schemes.
SIP
Additionally, the rupee cost averaging feature ensures that expenses remain stable, even during market fluctuations.