Power of Compounding: How can you generate Rs 90 lakh, Rs 1 crore, and Rs 2 crore corpus by 60, starting at 30, with just Rs 3,000, Rs 6,000, and Rs 9,000 monthly investments?
The major thing that investors should appreciate in compounding is the value of the time it requires. The longer your money can remain uninterrupted, the more your wealth can grow with the power of compounding. Suppose you invest an amount of Rs 3,000 at a 12 per cent annual compounding rate for different time durations. Your money is going to multiply and bear more returns when it is 60 years old than it was when just 30 years old.
Investing isn't just about putting in a lot of money. Even small, regular investments can add up to a big corpus in the long run. With a solid plan and consistent effort, you can reach your financial goals surprisingly fast. Let's break it down and see how investing a small amount of Rs 3,000, Rs 6,000, and Rs 9,000 each month can lead to a sizeable corpus by the age of 60.
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What is compounding?
Compounding helps you earn returns on both your initial investment and the returns that accumulate over time. This powerful effect can significantly grow your wealth in the long term. The key is to start investing early and maintain a consistent approach to maximise the benefits of compounding.
What is SIP?
A Systematic Investment Plan (SIP) lets you invest a fixed amount in mutual funds at regular intervals - daily, weekly, monthly, quarterly, or yearly. The best part? Some mutual fund SIPs let you start your investment journey with as little as Rs 100, making it accessible to investors with varying budgets.
How does SIP work?
A systematic investment plan allows investors to invest a fixed amount regularly. You can set up a SIP with a mutual fund company and instruct them to deduct a fixed amount from your bank account at regular intervals.
Benefits of SIP
SIPs can help you build wealth in the long run through compounding and the power of regular investing.
They can make investing more manageable and less stressful by eliminating the need to time the market.
How can you benefit from compounding?
You can benefit from compounding by:
1. Starting to invest early, allowing your money to grow over time.
2. Being consistent with your investments, adding to your principal amount regularly.
3. Earning returns not only on your initial investment but also on the accumulated returns.
Are SIPs similar to mutual funds?
SIP (Systematic Investment Plan) isn't an investment itself, but a way to invest. It lets you put a fixed amount regularly into a mutual fund or other investment options. Think of SIP as a disciplined investment approach, not the actual investment.
SIP calculation conditions
Target corpus: Rs 90 lakh, Rs 1.8 crore, Rs 2.7 crore corpus
Monthly investment: Rs 3,000, Rs 6,000, Rs 9,000
Annualised return: 12 per cent
How much can Rs 3,000 monthly SIP build in 30 years?
The investment amount will be Rs 10,80,000, the capital gains will be Rs 81,62,920, and the estimated retirement corpus will be Rs 92,42,920.
How much can Rs 6,000 monthly SIP build in 30 years?
The investment amount will be Rs 21,60,000, the capital gains will be Rs 1,63,25,839, and the estimated retirement corpus will be Rs 1,84,85,839.
How much can Rs 9,000 monthly SIP build in 30 years?
The investment amount will be Rs 32,40,000, the capital gains will be Rs 2,44,88,759, and the estimated retirement corpus will be Rs 2,77,28,759.