A Systematic Investment Plan (SIP) is one of the two ways to invest in mutual funds. Through this, you can invest a fixed amount on a daily, weekly, monthly, quarterly, half-yearly, or yearly basis. You don’t need to invest a big amount at one time. SIPs can make you a disciplined investor and help you create a savings habit.
SIP has several benefits. Some of them include:
Flexible investment amount: In SIP, you can adjust your investment amount as per your capability.
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Market knowledge: To invest in an SIP, you don’t need to have too much market knowledge.
Diversification: You can diversify your portfolio to minimise the risk.
Rupee cost averaging in SIP: With the rupee cost averaging method you can take advantage of market volatility. This means when you invest a fixed amount regularly, SIP can average out the value of each unit.
Minimum investment in SIP and annual returns estimations
There is no limit to the amount you can invest in a SIP. The minimum amount that you can invest is Rs 500 per month. You can get around 12-15 per cent annual returns in the SIPs.
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Rs 3,500 monthly SIP for 31 years vs Rs 35,000 monthly SIP for 11 years
This article will compare two monthly SIP investments- Rs 3,500 monthly for 31 years and Rs 35,000 monthly for 11 years. The annualised return in each case will be 12 per cent. Let’s see which one gives higher returns.
What will be the corpus from Rs 3,500 monthly SIP investment in 31 years?
In 31 years, you can accumulate Rs 1,21,22,098 by investing Rs 3,500 per month. The total investment in 31 years will be Rs 13,02,000 and the total estimated returns will be Rs 1,08,20,098.
What will be the corpus from Rs 35,000 monthly SIP investment in 11 years?
In 11 years, you can accumulate Rs 92,29,034 by investing Rs 35,000 per month. The total investment will be Rs 46,20,000 and the total estimated returns will be Rs 46,09,-34.
Investing in mutual funds is subject to market risks. Consult your advisor before making any investment.