The path to financial independence is paved with financial goals and to achieve financial goals one needs prudent investment. One of the inflation-beating instruments of investment that middle-class Indians have embraced in large numbers is mutual funds. The method of investment that has captured the imagination of most people is the Systematic Investment Plan or SIP.
SIP helps one to plan one’s financial journey with great comfort. This is the reason behind the booming popularity of SIP. In May this year, the inflows into the market through SIPs touched almost Rs 21,000 crore. May was the second month when the inflows scaled the Rs 20,000 summit in April for the first time.
Mutual Fund: How to build a corpus of 5 crores
Let’s assume the dream of a young investor is to accumulate Rs 5 crore by the time he/she reaches the age of retirement. The SIP calculator allows one to chart the journey to that financial goal in a planned, smooth manner.
Let’s also assume our investor is an intelligent fellow and begins investing from the age of 25, when he/she begins to earn. Investing from an early age gives him/her a head start. Let’s see how. The SIP calculator will help him/her to find out how much he/she needs to invest regularly to reach the dream figure of Rs 5 crore.
Believe it or not, our investor has to invest only Rs 7,800 a month to attain the goal of making Rs 5 crore by the age of 60.
Considering that usually one’s salary goes up and he/she can invest a little more every year, this amount can only go up.
But how can the SIP calculator help one to find out the quantum of investment regularly?
The calculator
Let’s take an example. Our Investor can use an online SIP calculator that is available on AMFI (Association of Mutual Funds in India) website or any other popular website such as the State Bank of India (SBI).
In the calculator he/she needs to type in a few simple information. First, he/she needs to determine what the financial goal is ie, how much wealth he/she needs to create at a particular point of time.
Then he/she has to type in for how many years he/she wants to continue the SIP. In our instance, it will be 35 years (60-25=35).
He/she also has to type in what rate of returns he/she is expecting. A 12% return in the long term is a rule of the thumb and very much attainable if one is investing in equity funds. If the rate of return eventually exceeds 12%, the investor will end up making more money.
Now, he/she has to type in the SIP amount and the calculator will automatically show the amount of wealth that will be created at the end of the desired period.
Tweak the amount
The investor can easily tweak the SIP amount and period to find out what amount he/she can invest comfortably every month and what corpus will it generate.
Bear in mind that SIPs can be done at regular intervals though most investor opt for monthly ones. It can also be done quarterly, weekly, and even daily. One can even do it bi-annually or just once in six months..
Moreover, experts are unanimous in their opinion that fir best results SIPs must be continued for the long term to realise the power of compounding to its fullest. Also there is no particular time to begin an SIP. Irrespective of whtehr the market is high or low, one can start an SIP.
Mutual Fund investment: The SIP calculator is a great liberator. It empowers you to plan your financial journey with comfort and coast to your goal. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
