Power of Rs 2,000 SIP: How quickly can you generate over Rs 60 lakh corpus with just Rs 2,000 monthly investment?
You may find 30 years to be a big commitment and time frame, but practically, it would just pass by. Imagine if you start investing this small amount of Rs 2,000; it would generate a huge corpus of Rs 60 lakh one day, instead of spending this small amount on something that won’t last long. You should give it a thought; if not now, then never. Saving is the best habit one can adopt; once you start saving, those days are not far from when you would invest and meet your long-term and short-term goals.
Rs 2,000 may seem a very small amount to those who are not aware of the power of small investments. Even a small amount can make a big difference. In the same context, to find out what a big difference a small Rs 2,000 can make, you have to go through the article. Here, we will discuss how investing in a Systematic Investment Plan (SIP) can help you build a sizeable corpus with the help of the power of compounding. Let's find out more about it through basic calculations.
Photos source: Pixabay/Representational
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
Introduction to systematic investment plan (SIP)?
SIP is an investment scheme where you can invest a fixed amount in mutual funds. You can invest daily, weekly, monthly, quarterly, or yearly, depending on your choice.
What is power of compounding?
The power of compounding means that when you invest money, you can earn more money not only on the amount you initially invested but also on the profits it makes over time. This creates a rapid growth of your wealth, making it bigger and bigger.
Why should one opt for SIP?
SIP is beginner-friendly, by investing even a small of Rs 100 regularly, first-time investors can start their journey toward building a sizeable corpus. It is also convenient, with automated deductions you don’t have to worry about missing out on investment.
Why investing early is key to building a sizeable corpus?
To get maximum returns from investment in the long run one should start investing early. Let’s understand it through an example.
Start early
Investor A: Starts investing Rs 5,000/month at age 25 and continues till age 45 (20 years).
Total Investment: Rs 12,00,000
Maturity Amount (at 12 per cent annual return): Estimated Rs 45,99,287
Investor B: Starts investing Rs 5,000/month at age 35 and continues till age 45 (10 years).
Total Investment: Rs 12,00,000
Maturity Amount (at 12 per cent annual return): Estimated Rs 11,20,179
By starting 10 years earlier, Investor A earns Rs 34,79,108 more, showcasing the power of compounding.
SIP calculations
Target corpus: Rs 60 lakh
Monthly investment: Rs 2,000
Annualised return: 12 per cent
How long it will take to create a corpus of over Rs 60 lakh with Rs 2,000 monthly SIP
It will take approximately 30 years to generate over Rs 60 lakh.
How much can Rs 2,000 monthly SIP build in 10 years?
The investment amount will be Rs 2,40,000, the capital gains will be Rs 2,08,072, and the estimated retirement corpus will be Rs 4,48,072.
How much can Rs 2,000 monthly SIP build in 20 years?
The investment amount will be Rs 4,80,000, the capital gains will be Rs 13,59,715, and the estimated retirement corpus will be Rs 18,39,715.
How much can Rs 2,000 monthly SIP build in 30 years?
The investment amount will be Rs 7,20,000, the capital gains will be Rs 54,41,946, and the estimated retirement corpus will be Rs 61,61,946.