To lead a financially stable life during the time of retirement, people invest in various securities and mutual fund units. A well-defined financial strategy is all you need to accumulate wealth in the long-run. Amidst all this, do you know, you can be a crorepati by regularly investing money in SIP?
A mutual fund is the preferred investment type for both new and experienced investors. The primary benefit of mutual funds is that you get access to diversified financial instruments. For instance, if you have invested in a mutual fund , you would get access to several stock units at a specific amount. In case some units don’t perform, the other units can compensate for the returns. This is nothing but diversification.
One such investment type is Systematic Investment Plan or SIP, which mutual fund companies offer. SIP allows you to invest fixed amount in mutual fund schemes at regular intervals. You can invest in the plan monthly, quarterly or weekly basis. The amount you invest could start from as low as Rs. 500 per month.
SIP is a flexible and affordable investment unit that allows you to start from low amount and then you can increase the investment amount slowly.
The investment type allows free entry and exit without imposing any charges. You can withdraw the amount, and there is no penalty for it
If you have a low-risk appetite, SIP is an ideal choice to get decent returns, and it is not affected by the ups and downs of the market
The investment in SIP is managed by an expert who has knowledge about the market tactics and switches your fund
The Power of Compounding effect makes your money grow exponentially as the tenure increases.
Now that you’re aware of the benefits, you can start investing in SIP by following the below steps:
The foremost rule of any investment depends on your risk tolerance level. The higher the age and financial commitments lower is the risk appetite. However, you need to have high-risk taking ability to get high returns for a period of time. Along with the risk, you need to identify what is your ultimate goal – it can be marriage, funding your child’s education, a vacation, buying a car, etc.
After you have identified risk tolerance and personal financial goals, the next step is to know which mutual fund scheme, is suitable for you. While selecting the scheme, you should inspect the past performance of the fund.
For Systematic Investment Plan, you can make payments weekly, monthly or quarterly. The mutual fund company directly deducts the fee by auto-debiting from your saving account. You can choose a payment date as per your convenience.
The length of the SIP period ranges from 3 to 5 years. It is the best way to build wealth in long-term investments. You do not need to check the price of mutual fund schemes. It lets you to stay worry-free until the end of the investment period.
Building corpus of Rs. 1 crore in 10 years through SIP can be tempting. Making a lumpsum investment can help in accomplishing the target in just a few years. Let’s get to know how to become crorepati by SIP.
Assuming an average return of 12%, you need to invest around Rs. 11,600 per week or Rs. 50,000 monthly to build a corpus of Rs. 1 crore in 10 years. Here we would recommend a word of caution; such a large amount will not be enough to take care of your financial goals. Make sure you find out your long-term goals and set a realistic target to build enough corpus for future.
Projected SIP returns for various time durations:
|Duration||SIP Amount (in Rupees)||Future Value (in Rupees)|
|5 years||50,000||Rs. 41.2 Lakhs|
|8 years||50,000||Rs. 80.8 lakhs|
|10 years||50,000||Rs.1.2 crores|
What factors slow down your target?
The fund you have chosen could underperform consecutively failing to meet the 12% target
GDP growth that goes below 7% due to war, recession or political turmoil
Increase in tax slabs of equity units by future governments
Investment in SIP is an excellent way of building a corpus for the future, but you need to set realistic targets. The plan is all about systematic saving that helps you achieve your goal in the long-run.