Do you keep thinking of ways to become a crorepati? What if we tell you, we can help you become one? And no, you do not need to sell your kidney for that. All you need to do is invest in equity mutual funds via SIP over a substantial period. To save Rs1 crore, or even more, you need to keep saving regularly and use equity asset class to your benefit to achieve your long-term financial objectives. To ensure that you save regularly, start an SIP investment in an equity mutual fund.
Systematic Investment Plan or commonly known as SIP is a method of investing in a mutual fund to achieve your long-term goals. Under this mode, you invest a fixed amount in your preferred mutual funds at fixed intervals over a significant period. These intervals could be daily, weekly, monthly, quarterly, bi-annually, or annually. This investment amount could be as low as Rs500 per month.
But, how much should you invest in mutual funds via SIP to create 1 crore?
Assuming an average rate of return at 12%, you need to invest Rs5500 per month to build a corpus of Rs1 crore in a duration of 25 years. If you wish to accumulate Rs1 crore in a span of 30 years, you just need to invest Rs2900 via SIP.
However, if you are not in a position to save a substantial amount in the initial years, or wish to achieve Rs1 crore in a short duration, you can still accumulate Rs1 crore. Let’s understand how. All you need to do is increase your SIP investment amount by a particular percentage each month. In the above example, one can start a monthly SIP of Rs 4,000 and then increase the SIP amount by 4% each month. The result is the same as the accumulated corpus will be about Rs 1 crore.
As stated above, it takes 25 years to save Rs 1 crore by investing Rs5,500 each month at an assumed growth rate of 12% per annum. Now, if an individual wants to save Rs1 crore in a shorter span, say 20 years, by investing the same amount of Rs5,500, the monthly increase in SIP investment should be about 9%.
Increasing SIP percentage method also helps to create a higher corpus if the investment horizon is constant. For instance, if an individual invests in a mutual fund investment with an SIP amount of Rs5000 for 20 years, at an assumed growth rate of 12% per annum, the amount on maturity would be around Rs50 lakhs. Now, with a 10% increase in SIP per month, the amount at the end of the tenure will be nearly Rs1 crore.
You can also use an SIP calculator to better perceive the total SIP returns on maturity. Using an SIP calculator is very easy. You just have to input the investment amount, expected rate of returns, and the investment horizon you are wishing to invest in mutual funds. Click on calculate, and voila, the mutual fund calculator would provide you with the value of your SIP investments on maturity. Happy investing!