AMFI data for September shows that monthly SIP contributions rose to Rs 24,508 crore, up from Rs 23,547.34 crore in August. The number of new SIPs registered in September stood at 6,638,857. While, the SIP AUM hit an all-time high of Rs 13.81 lakh crore.
This spike in SIP numbers reflects growing trust of retail investors and increasing popularity of mutual funds beyond tier-1 cities. Also, the industry expanding with various new products helped SIP numbers improve further.
Systematic Investment Plan, or SIP, is useful for those who cannot invest a large amount at once but want to build a substantial fund over a few years. This feature only attracted a large number of retail investors towards SIP investment in mutual funds. SIPs leverage the cost averaging by buying NAVs in different proportions at different times, thereby providing the benefit of compounding returns. If one keeps investing consistently, one can accumulate a substantial amount in the long run, even if one’s monthly SIP is small.
If we assume a realistic annual return rate of 14%, it is interesting to see that many mutual funds have performed even better than this over the last 10, 15 and 20 years. Through consistent investing, investors can accumulate a significant amount over the long term, even if their monthly SIP is small. This is an effective strategy that helps grow your investments over time.
Let’s see from these calculations in how many years you can reach your Rs 1 crore investment corpus goal while investing Rs 2,000, 3,000 and 5000 per month, assuming 14% CAGR.
Example 1: Monthly SIP of Rs 2,000
Monthly SIP: Rs 2,000
Rate of return: 14%
Total investment in 30 years: Rs 7,20,000
Total estimated returns: Rs 1,03,94,111
Total value: Rs 1,11,14,111
If you invest Rs 2,000 per month and get a CAGR of 14%, it will take 30 years to accumulate over Rs 1 crore.
Example 2: Monthly SIP of Rs 3,000
Monthly SIP: Rs 3,000
Rate of return: 14%
Total investment in 27 years: Rs 9,72,000
Total estimated returns: Rs 99,19,599
Total value: Rs 1,08,91,599
If you invest Rs 2,000 per month and get a CAGR of 14%, it will take 27 years to accumulate over Rs 1 crore.
Example 3: Monthly SIP of Rs 5,000
Monthly SIP: Rs 5,000
Rate of return: 14%
Total investment in 23 years: Rs 13,80,000
Total estimated returns: Rs 88,37,524
Total value: Rs 1,02,17,524
If you invest Rs 5,000 per month and get a CAGR of 14%, it will take 23 years to accumulate Rs 1 crore.
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