Everyone invests in mutual funds through SIPs, but most people cannot create the fund they want. Today, we will discuss a simple formula that can help you become a millionaire in 20 years.
To do this, you need to use the 4x15x20 formula. With this formula, anyone can easily save up to ₹8 crore in 20 years. Let’s understand this formula with an example.
What is the 4x15x20 Formula?
4 means you need to invest ₹4,000 every month as a SIP.
15 means you should increase your investment by 15% each year.
20 means the investment period will be 20 years.
Let’s understand this formula better with some simple calculations.
NORMAL SIP (12% Compounding):
10k per month
25 yrs – 1.9 Cr
20 yrs – 1 CrSTEP UP SIP 12% Annual Compounding (INCREASE MONTHLY INVESTMENT BY 10% EVERY YEAR)
10k per month with Step Up of 10% every year
25 yrs – 4 Cr
20 yrs – 1.87 CrA small Step Up can have Huge Impacts in… pic.twitter.com/RyjQBfJiMx
— Fundamental Investor ™ 🇮🇳 (@FI_InvestIndia) April 13, 2024
SIP Calculation Example
Invest ₹4,000 every month in a SIP.
Assume the return is 12% per year.
Invest for 20 years.
Increase your investment by 15% every year (Step-Up feature).
If you do this, you can get ₹1.21 crore after 20 years.
The total money you put in (principal) will be ₹4,91,700.
The rest, ₹7,18,500, comes from returns.
If you do not use the step-up, you will get only ₹3,95,700 after 20 years.
Disclaimer: This is for learning only. It is not investment advice. The stock market can be risky. Talk to a certified investment advisor before investing.