Systematic Investment Plan (SIP) is one of the most effective ways to save. If one’s target is to accumulate Rs 1 crore or more, it is considered one of the best mechanisms for wealth accumulation because it harnesses human behaviour and automatically handles market volatility. But if you ask someone how long a Rs 10,000 monthly SIP would take to Rs 1 crore, Rs 2 crore and Rs 3 crore, the person will assume each additional crore takes roughly the same number of years as the last. But it doesn’t. The first crore is, by far, the slowest milestone. Every crore after that arrives faster.
Let’s have a look at some calculations to find out how long it will take to achieve the targets:
At an assumed 12 per cent annual return, a Rs 10,000 monthly SIP will take nearly 241 months, but from Rs 1 crore to Rs 2 crore will take only 65 months and from Rs 2 crore to Rs crore will take just 39 months:
- Rs 0 to Rs 1 Crore: 20 years 1 month
- Rs 1 Crore to Rs 2 Crore: 5 years 5 months
- Rs 2 Crore to Rs 3 Crore: 3 years 3 months
Here’s how much time it will take to achieve the target at a more optimistic 15 per cent annual return:
- Rs 0 to Rs 1 Crore: 17 years 5 months
- Rs 1 Crore to Rs 2 Crore: 4 years 5 months
- Rs 2 Crore to Rs 3 Crore: 2 years 7 months
Power of compounding
“This is compounding doing exactly what it is supposed to do. In the early years, almost the entire corpus is built from the investor’s own monthly contributions, with very little help from growth, because there simply isn’t much money in the account yet to grow. Twenty years in, that has flipped. A large base of accumulated capital is now generating its own returns every year, on top of the same Rs 10,000 monthly contribution, and that base does most of the heavy lifting from that point forward,” said Amit Suri, Director & CEO, CFP, AUM Wealth Pvt. Ltd.
Key takeaway for investors
The practical takeaway for any investor is not to be discouraged by how far away the first crore looks in year one. That distance is the price of admission. Once it’s paid, the second and third crore are no longer a matter of waiting through the same slow climb again; they’re a matter of staying invested and letting a much larger sum keep compounding.
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