Power of compounding: Monthly savings Rs 3,000; here's how you can generate Rs 3 crore corpus through step up SIP
Starting to invest at the right time matters. The one who begins investing early is likely to be the winner in the race to build a large retirement corpus in comparison with a person who starts late. Here, we will understand how monthly savings of Rs 3,000 can help investors generate an estimated retirement corpus of Rs 3 crore through step up systematic investment plan (SIP).
Investing early or late is up to the choice of an individual, but building a retirement corpus before the estimated retirement age can provide peace of mind and financial freedom for them. If an individual is just saving Rs 3,000 monthly and investing it in a mutual fund scheme through SIP, they can build a corpus of Rs 3 crore in the long run. Let’s understand how.
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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)
Understanding step up SIP
SIP and step up SIP are closely related but they have distinct features. A systematic investment plan (SIP) has a fixed amount, whereas a step up SIP allows for periodic increases. Let’s understand it in detail.
SIP
Mutual fund SIP has a fixed investment amount that remains the same throughout the period. Investors can invest daily, weekly, monthly, half-yearly, or yearly in it, with a minimum amount of Rs 100.
Step up SIP
In step up SIP, investors can increase their investment amount at regular intervals, either periodically or annually (6 months or 12 months) by a fixed amount or percentage.
Benefits of step up SIP
You can start with a fixed monthly investment and gradually raise your contribution as your income rises. Step up SIP investment in such a way can help maximise your return.
Corpus in 10 years starting with Rs 3,000 monthly step up SIP
A step up SIP started with Rs 3,000 monthly investment, along with a 5 per cent step up SIP each year. It can generate an estimated corpus of Rs 8,36,083 in 10 years with an annualised return of 12 per cent. The invested amount will be Rs 4,52,804, and capital gains will be Rs 3,83,279.
Corpus in 20 years starting with Rs 3,000 monthly step up SIP
A step up SIP started with a Rs 3,000 monthly investment can generate an estimated corpus of Rs 41,21,287 in 20 years. The invested amount will be Rs 11,90,374, and the estimated capital gains during that time will be Rs 29,30,913.
Corpus in 35 years starting with Rs 3,000 monthly step up SIP
A step up SIP started with a Rs 3,000 monthly investment can generate an estimated corpus of Rs 2,99,08,829 crore in 35 years. The invested amount during that time will be Rs 32,51,531, and estimated capital gains will be Rs 2,66,57,298.
How Rs 3,000 monthly step up SIP can generate Rs 3 crore fund
A monthly SIP of Rs 3,000 with a 5% step up each year can take around 35 years to generate an estimated capital of Rs 3 crore. So, if you start investing at the age of 25, after 35 years you can have estimated retirement corpus of Rs 2,99,08,829. The estimated capital gains will be Rs 2,66,57,298, and the estimated invested amount during that time will be Rs 32,51,531.
What if you go for a simple Rs 3,000 monthly SIP for 35 years
A monthly SIP of Rs 3,000 can generate an estimated corpus of Rs 1,94,85,807 in 35 years with an annualised return of 12 per cent. The estimated invested amount in 35 years will be Rs 12,60,000, and the estimated capital gains will be Rs 1,82,25,807.