To understand the power of SIP (systematic investment plan), let’s take two numbers – Rs 5,000 and Rs 100,00,000.
The second figure (Rs 1 crore) is nothing less than 2,000 times bigger than the first. In other words, if one can save Rs 5,000 a month, he/she would need more than 166 years to accumulate Rs 1 crore. But the average human lives barely half of that time period. In short, there is no way one can make Rs 1 crore if one manages to save Rs 5,000 regularly each month.
Hold on, there is a way to make Rs 1 crore – in fact, far more than Rs 1 crore – if one can spare Rs 5,000 every month regularly with a number of years left to enjoy it in one’s lifetime.
Mutual Fund SIP investment
The enabling tool is called SIP or systematic investment plan. As the name indicates, SIPs are systematic investments. One can do them daily, weekly, monthly and quarterly.
One usually invests in mutual funds through SIPs. Mutual funds, in turn, can invest them in different asset categories such as equities, debt instruments, gold or silver, real estate or some other assets. One is free to choose the type of mutual fund to invest, thereby, selecting the type of end assets one wishes to invest in.
The real attraction point of SIPs is that one can use free calculators to understand what amount of investment over a period of one’s choice can build a corpus that one might need.
To the common man, a crorepati is still a big attraction.
SIP calculator: How to become a crorepati
Most people don’t appreciate the fact that with a disciplined investment approach, one can make well over Rs 1 crore over a period of time, provided one invests doggedly and doesn’t break the regularity.
A small calculation will show you how to make in excess of Rs 1 crore through the SIP route.
Say our man can invest only Rs 5,000 every month. We would assume that he would be able to continue it every month for 26 years. We would also assume a that our investor would earn 12% return from the investments – not a difficult proposition if one does it for the long term. Believe it or not, what would have taken this person 166 years would not take him/her only 26 years.
It means if he/she begins at the age of 30 years, the goal of Rs 1 crore will be exceeded by a healthy amount by the time he/she is 56 years of age.
In fact, it would take the corpus past Rs 1.07 crore.
If our candidate is lucky to get a return of 13%, he/she would rake in Rs 1.13 crore in the 25th year.
Therefore, being a crorepati is easily within your grasp. Start saving and choose a few mutual funds to invest in. Any qualified investment advisor can guide you on the way to a crorepati.
SIP calculator is available online and is completely free. All major banks such as SBI, HDFC, ICICI, Axis, PNB offer it online. You can do the arithmetic for yourself.
Mutual Fund investment: A SIP is perhaps the most powerful tool designed to help the common man build a corpus of funds for his life’s goals. Millions are already using it to their advantage. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
