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Power of Compounding: How much do you need to invest monthly via SIP to build Rs 5 crore corpus in 25 years?
- Written by Priya Vishwakarma
Published: Zee Business| Updated: Zee Business
Power of Compounding: There are various investment strategies available in the market for long-term investments, and one of them is SIP (Systematic Investment Plan). It is a strategy of investing in mutual funds that allows investors to invest money based on their financial capacity. You can set your SIP goals to buy a house, build wealth for your retirement, accumulate money for your child's education, marriage or other things.
There are many advantages of SIP, such as
- Flexibility in investment
- Rupee cost averaging
- Power of compounding
Power of compounding: Compounding is a process in which you earn capital gains not only on the principal but also on the accumulated capital gains from previous periods. Using the power of compounding, one can create a substantial amount over time through the snowball effect
In this write-up, we will calculate how much money you need to invest in SIP each month to generate a Rs 5 crore retirement corpus in 25 years -
1/8
Assuming the annualised return rate
1/8For all calculations, we are assuming an annualised return rate of 12 per cent.
2/8
Understand the scenario
2/8Target: Rs 5 crore Time: 25 years Annualised return rate: 12% (assumed) Investment per month: ?
3/8
SIP investment: Rs 5 crore in 25 years
3/8If the annual rate of return is 12 per cent, how much do you need to invest in SIP mutual funds every year to create a wealth of around Rs 5 crore in 25 years? Let's find out
4/8
How much money do you need to invest in SIP/month?
4/8According to the calculations, you will need to invest at least Rs 30,000 per month in SIP mutual funds to create a wealth of over Rs 5 crore in 25 years.
5/8
What will your average investment be in 25 years?
5/8In 25 years, you will invest a total of Rs 90,00,000 in SIP.
6/8
What will be your expected capital gain in 25 years?
6/8With a monthly SIP investment of Rs 30,000, your expected capital gains will be around Rs 4,20,66,197.
7/8
At the end of 25 years, what is the total amount you can receive?
7/8At the end of 25 years, including the principal investment and capital gains, you will receive a total of Rs 5,10,66,197.
8/8
Full Calculation Summary
8/8Total Investment Amount: 90,00,000 Capital Gains: Rs 4,20,66,197 Total Approx. Return: Rs 5,10,66,197
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