More and more Indians are investing in mutual funds through the systematic investment plan or SIP route. It offers one to plan one’s financial journey and make regular investments in tandem with one’s cash flow.
Let’s see how one can make a corpus of Rs 1 crore in a matter of 5 years through SIP in mutual funds.
AMFI tools
The Association of Mutual Funds in India or AMFI offers such a calculator on its website. It helps an investor to determine how much money he/she needs to investment regularly to reach a particular goal. This is called a goal SIP calculator, thus named since it gives you a figure to invest to reach a specified financial goal. Incidentally, other major banks such as State Bank of India (SBI), HDFC, ICICI also offer SIP calculators.
In this case, it is assumed that a return of 12% will be available in the funds that our investor will be investing.
The calculator tells us that one has to invest Rs 1.22 lakh every month for 5 years without a break in order to arrive at a final pool of Rs 1 crore.
Increasing the time period
Now, let’s see how increasing the time period can help to reduce the SIP amount drastically.
If one doubles the time period to 10 years ie, one has to make Rs 1 crore in 10 years, the amount of money that one has to invest through SIP becomes about one-third. In short, one can invest just about Rs 43,470 every month for 10 years and hope to make Rs 1 crore.
Raising the time period by 5 more years brings down the SIP amount to only Rs 20,016. In all these three scenarios, we assume that the rate of return is 12%. If this rate of return rises, the amount in the corpus will be higher than Rs 1 crore.
Impact of time
There is one vital lesson in this calculation. And that is, time has a great impact on making money through SIP. The longer one keeps investing through this route, the disproportionately bigger amount one can make.
Therefore, all investment strategists advise people to continue SIP for the long term.
This is the reason why so many people in India are adopting this route to invest in mutual funds to build a sizeable corpus of funds. The amount of money flowing to the markets through SIP has, for the first time, crossed Rs 20,000 mark to reach Rs 20,300 crore in April alone. The amount further rose to more than Rs 20,900 crore in May.
The goal SIP calculator offered by AMFI free of cost online is an effective tool. It allows one to calculate the regular amount one should invest to reach a particular financial goal. Business Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
