Mutual fund investors in India prefer Systematic Investment Plan (SIP) over lump sum investment as SIPs give them the freedom to invest a small amount in regular investment cycles. The advantage of SIP investment is that one can start a monthly investment with Rs 500.
The investor can increase or decrease the SIP amount as per their income or investment capacity.
They can also stop a SIP during financial crunches by informing the fund house, and they can restart that whenever they regain their investment power.
SIP provides compound growth, so they can build a huge corpus if they stay in their investment for a long time.
E.g., at a 12 per cent annual return, a Rs 1,000 SIP per month can help you accumulate wealth of Rs 2.30 lakh, Rs 10 lakh, and Rs 35.30 lakh, respectively.
As you see, wealth increases faster as the investment duration becomes longer.
It is possible because of compound growth.
In a similar way, SIPs of Rs 5,000, Rs 10,000, and Rs 15,000 can work wonders.
If you stay in your investment for a long time, these investments can help you achieve a crorepati status easily.
In this article, know how much time it takes to become a crorepati if you start SIPs of Rs 5,000, Rs 10,000, and Rs 15,000 each and get a return of 12 per cent on each of these investments.
Rs 1 crore corpus with Rs 5,000 SIP
If you start a Rs 5,000 SIP in a mutual fund(s) and get a return of 12 per cent, you can get a Rs 1 crore corpus in 26 years.
In those years, your amount invested will be Rs 15,60,000 (Rs 15.60 lakh), long-term capital gains will be Rs 91,95,560 (around Rs 92 lakh), and total wealth will be Rs 1,07,55,560 (nearly Rs 1 crore).
Rs 1 crore corpus with Rs 10,000 SIP
If you invest Rs 10,000 a month in a mutual fund(s) through SIP and get a 12 per cent return on your investment, your investment in those years will be Rs 24,00,000 (Rs 24 lakh), long-term capital gains will be Rs 75,91,479 (Rs 75.91 lakh) and the expected amount will be Rs 99,91,479 (near Rs 1 crore).
Rs 1 crore corpus with Rs 15,000 SIP
If you invest Rs 15,000 a month in a SIP and get a 12 per cent return on your investment, it will take you 17 years to get a Rs 1 crore corpus.
In 17 years, your total investment will be Rs 30,60,000 (Rs 30.60 lakh), your long-term capital gains will be Rs 69,58,812, and your wealth will be Rs 1,00,18,812 (over Rs 1 crore).
Interesting observation
Here, the interesting observation is that when you make a Rs 5,000 SIP, your total investment is Rs 15.60 lakh; at Rs 10,000 SIP, your total investment is Rs 24 lakh; and at Rs 15,000 SIP, your total investment is Rs 30.60 lakh for creating a Rs 1 crore corpus. It shows that in compound growth, your number of investment years matters a lot.