For many investors in India, reaching the target of Rs 1 crore remains a key financial goal. Amid rising cost of living, it may feel difficult to achieve these goals in time. But disciplined investment and savings habits can lead you to that path with much less effort.
Historical trends show that one of the most reliable ways to achieve long-term goals is through systematic investing. Among the most popular methods is the Systematic Investment Plans (SIPs) that allow investors to contribute a fixed amount regularly into mutual funds. While there are many types of mutual funds, data shows that equity-oriented tools are one of the fattest ways to harness the power of compounding through disciplined investing.
So, how long does it actually take to become a crorepati if one chooses this path? The answer depends on various factors. The timeline is majorly determined on the returns generated by the chosen funds and the consistency of contributions. SIPs have been carefully designed to help investors avoid the pitfalls of market timing. It instead focuses on steady accumulation of wealth over the years.
Rs 20,000 SIP To Reach Rs 1-Crore Target
By investing regularly, SIPs help individuals to benefit from compounding and market discipline. Going by mutual funds’ track record over the years, it can be seen that they have delivered higher returns than many traditional assets.
Assuming that you invest Rs 20,000 per month into a mutual fund SIP generating an annual return of 12%, here is how much time it will take to reach the Rs 1 crore target.
- Monthly amount: Rs 20,000
- Investment duration: 15 years
- Expected rate of return: 12%
- Invested amount: Rs 36,00,000
- Estimated returns: Rs 64,91,520
- Total value: Rs 1,00,91,520
This highlights that an individual will take nearly 15 years to reach the target of Rs 1 crore via mutual fund SIPs. To reach the target early, you can even consider going up with step-up SIP.
Step-up SIP plans are nothing but an easy way to gradually increase your contribution (typically at fixed intervals) to power the compounding process at a faster rate. Investors usually step-up their contribution annually, to ensure that it matches with their increased income.
This means, you get the chance of achieving your financial goal over a shorter tenure. Here’s how it works:
- Monthly Investment: Rs 20,000
- Expected rate of return: 12% per annum
- Step-up: 10% per annum
- Tenure: 12 years
- Invested Amount: Rs 51,32,172
- Estimated Returns: Rs 49,16,427
- Total Value: Rs 51,32,172
Usually, it is seen that when people start investing at a later stage, they tend to go for a higher SIP amount. This is generally done to make up for the lost time. Higher initial SIPs can boost the power of compounding. However, even after investing a small SIP amount of Rs 20,000, reaching a Rs 1 crore goal is not very difficult.
With the step-up process, one reaches their goal faster but must invest more. Ultimately, this decision rests with investors about how they want to reach their financial goals without affecting their quality of life.
While equity-oriented mutual funds have traditionally rewarded investors, their returns are never guaranteed. As a result, a careful investment journey must be undertaken after consulting with a certified expert before making any significant financial commitments.
ALSO READ: Starting At 27? Here’s The SIP Plan You Need To Build Rs 1-Crore Corpus
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