SIP Calculator: To secure the future, people often think that they will have to invest a large amount. But the truth is that even small savings can create a big capital in the long run. Systematic Investment Plan (SIP) in mutual funds is one such system, which has given a strong financial base to millions of investors. The beauty of SIP is that even a simple amount every month can turn into lakhs of rupees with the power of compound interest. This is the reason why a fund of Rs 25 lakh can be created even with a monthly SIP of just ₹5,000.
How does SIP multiply money?
The entire mathematics of SIP is based on compound interest. That is, on investment, interest is not only received on the principal, but also on the interest. The longer time you give to the investment, the faster the money will grow. This is the reason why long-term investment in mutual funds is always considered beneficial.
The stock market gives an average return of 10% to 15% per annum. According to this, if an investor keeps doing SIP regularly, then over time their small monthly amount can reach crores.
Truth of calculation: Difference between 10%, 12% and 15% returns
Suppose a person does a monthly SIP of ₹5,000. If he gets an average return of 10% per annum, then it will take about 20 years to create a fund of 25 lakhs. But as soon as this return is 12%, the same goal will be achieved in about 17 years. And if the return is 15%, then this time will be reduced to just 15 years.
That is, the better the return, the sooner the goal. This is why it is very important to choose the right fund and continue investing for a long time.
How to reach 25 lakhs quickly?
Many investors want to achieve their goals sooner. There are two ways to do this. First, increase the SIP amount. If a person starts a SIP with ₹7,000 or ₹10,000 instead of ₹5,000, then the target of ₹25 lakh can be achieved 3–5 years earlier.
The second way is step-up SIP. This means increasing your SIP amount by 10% every year. For example, if a person starts a SIP with ₹5,000 in the first year and adds 10% to it every year, then he can create a fund of ₹25 lakh in just 12–13 years.
SIP Example: The Magic of Time and Returns
Suppose a person does a monthly SIP of ₹5,000 and gets an average annual return of 12%. In such a situation, after 10 years, his investment will be around ₹11.6 lakh. If you continue this SIP for 15 years, the amount will reach around ₹25.1 lakh. If the same investment continues for 20 years, then this figure will be around ₹49.9 lakh.
That is, the longer the investment period, the faster the money will grow. This is the biggest strength of SIP.
Don’t forget inflation
However, one thing is important to keep in mind. 25 lakh may seem like a huge amount today, but after 15–20 years, inflation will reduce its real value. Therefore, whenever you set a goal, definitely include the effect of inflation in it. If 25 lakh is needed for a dream today, then to fulfill the same dream in the future, perhaps 40 lakh or even more will be needed.
Importance of the right fund and advice
Before doing SIP, it is very important for the investor to choose the right mutual fund. Not all funds give the same returns, so one should choose the fund keeping in mind one’s risk capacity, goal, and period. Many times, people start investing without research and get disappointed and quit in the middle. This mistake should not be made.
If needed, consult a financial advisor and review your portfolio every year. Changing the fund from time to time or increasing the SIP amount can make your investment stronger.
Small amount, big future
The biggest lesson of SIP investment is that big dreams can be fulfilled even with a small amount. For this, only patience and discipline are needed. A monthly SIP of ₹5,000, if continued for a long time, can create a fund of not only 25 lakhs, but crores of rupees.
So if you have not started yet, do it today. Because every single day matters in SIP. The sooner you start, the sooner and bigger the benefits will be.