Power of Rs 4,100 SIP: In how many years you can generate Rs 4,00,00,000 corpus with just Rs 4,100 monthly investment? Calculations inside
In a SIP, you invest a fixed amount consistently (e.g., monthly) in a mutual fund. The accrued returns, including interest, are reinvested back into the fund. This means that your future profits are not just on the initial investment but also on the accumulated value of your SIP. For example, your initial amount of Rs 200 that generates 5 per cent interest annually, after one year, you will have Rs 110. By the end of the second year, the total value will be Rs 115.5.
SIP or Systematic Investment Plan is a method of investing in mutual funds. You can invest a fixed amount regularly, such as daily, monthly, quarterly, or half-yearly in SIP. The good thing about SIP is you can choose any amount starting from Rs 500 and can increase it as and when comfortable according to your income. If you want to achieve a financial retirement goal through SIP, you can do it through proper planning.
Images: Pexels
SIP and its benefits
In this article, we will have a detailed look at SIP and calculate how many years it will take to generate over Rs 4,00,00,000 corpus by investing Rs 4,100 per month in SIP.
Compound interest benefits
The process of generating interest on both the initial investment and the interest that has accrued is known as compounding. This implies that the gains generated by your growing SIP are reinvested, resulting in future returns that are even larger.
How compounding works in SIP
In a SIP, you invest a fixed amount consistently (e.g., monthly) in a mutual fund. The accrued returns, including interest, are reinvested back into the fund. This means that your future profits are not just on the initial investment but also on the accumulated value of your SIP.
For example, your initial amount of Rs 200 that generates 5 per cent interest annually, after one year, you will have Rs 110. By the end of the second year, the total value will be Rs 115.5.
Flexibility
SIP has many benefits, and one of them is flexibility. You can choose an amount and date as per your needs. There is also the option of choosing weekly, monthly, quarterly, or half-yearly payments.
Minimum investment in SIP
You can start an SIP with as little as Rs 500. However, SEBI has recently proposed a monthly SIP for a low ticket size of Rs 250.
Wealth creation
You can achieve your financial goals even with small, regular SIPs. The power of compounding plays a big role in accumulating the desired fund. You just need to do proper planning on time.
Rs 4,100 per month SIP
If you invest Rs 4,100 per month, you can accumulate more than a Rs 4 crore corpus in 40 years, calculations show.
Calculations of Rs 4 crore corpus
SIP: Rs 4,100/month
Time: 40 years
Invested amount: Rs 19,68,000
Total value: Rs 4,01,51,591
Estimated rate of returns
The above calculations are based on an estimated annualised return of 12 per cent.
Conclusion
From the above calculations, we can understand that if you start investing at age 20 and want a Rs 4 crore retirement corpus, you can easily achieve your goal by retirement.
Investing in mutual funds is subject to market risks. Consult your advisor before making any investment.