Investing in a SIP early, even with just Rs 100 a day, takes advantage of compounding. This can lead to a substantial retirement fund by the time you retire.
Mutual Fund SIP Calculator: The key to investing in any asset is giving your money enough time to benefit from the effects of compounding. This is equally true for mutual funds. The best part about mutual fund investments is that they provide you with the opportunity to invest through a Systematic Investment Plan (SIP).
SIP is a convenient way to invest in mutual funds by setting up standing instructions to debit your bank account each month. The SIP method of investment has gained popularity among Indian mutual fund investors of late thanks to big boom seen in equity markets.
SIP also simplifies long-term investing by fostering discipline, committing to a fixed amount for a set period, and adhering to this plan regardless of market conditions.
Doing SIP for a long term offers a significant advantage through the power of compounding. In simple terms, compounding occurs when the interest or income you earn is reinvested into the original corpus, allowing the accumulated amount to generate even more earnings.
SIP Calculator: Invest Rs 100 a day to build a Rs 5 crore MF corpus
Thanks to the compounding impact, when you start early and even with just Rs 100 a day or Rs 3,000 a month at the beginning your career, you can accumulate a substantial retirement corpus by the time you retire.
In this article, we will look at your financial journey over the next 35 years, starting with the premise that you are a 25-year-old who begins your career by investing Rs 3,000 a month in a SIP until age 60. We will also assume that you increase your SIP contribution by 10% each year, reflecting the growth of your income. This strategic approach not only capitalizes on the power of compounding but also ensures your investments keep pace with your earnings.
For our calculations, we’ll assume a moderate annual return of 12%, a reasonable expectation based on recent market trends.
Calculation breakdown:
Initial investment: Rs 3,000 per month (Rs 100 a day)
Investment duration: 35 years (from age 25 to 60)
Expected annual return: 12%
Total contributions: Rs 3,000 x 12 months x 35 years = Rs 97,56,877
Estimated returns over investment: Rs 4,35,43,942
Total corpus after 35 years: Rs 5,33,00,819
In conclusion, starting your investment journey at 25 with a monthly SIP of Rs 3,000 and increasing your contributions by 10% annually can lead to significant financial growth. With a moderate annual return of 12%, your total contributions of Rs 97,56,877 could yield estimated returns of Rs 4,35,43,942, resulting in a total corpus of approximately Rs 5,33,00,819 by retirement
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This blog is purely for educational purposes. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
