SIP Calculation: Many people think it’s difficult to start investing without significant savings or a substantial amount. However, the truth is that a mutual fund SIP can turn even a small amount into a substantial fund over time. The key reason for this is the power of compounding, which multiplies returns by adding interest on interest. This is why mutual fund SIPs have become the most reliable option for long-term investing.
A SIP is a method in which a person invests a fixed amount from their income every month. No matter how small this amount is, regular investment and compounding transform it into a substantial corpus. Therefore, SIPs are considered extremely beneficial for long-term goals such as a child’s education, marriage, or retirement.
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How to Build a Large Fund from Small Savings
If a person saves just Rs 60 a day, this amount becomes Rs 1,800 a month. If parents start investing this small amount in a mutual fund SIP from the child’s birth and continue for 30 years, this small amount can create a substantial corpus in the future. Mutual funds typically generate average returns of up to 12% over the long term.
How much will you earn at a 12% return?
At a 12% average annual return, a SIP of Rs 1,800 per month for 30 years can yield approximately Rs 5,545,752 at maturity. The total investment is only Rs 648,000, and the compounding yields profits of approximately Rs 49 lakh.
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What will happen at a 15% return?
If returns are slightly better and the investment grows at 15% annually, this small investment could grow to Rs 1,01,37,187. The profit margin would be approximately Rs 95 lakh.
An 18% return will create a fund worth crores
If the investor earns an average annual return of 18%, this SIP will generate a corpus of approximately ₹1,87,08,111 over 30 years. This involves investing ₹6,48,000 and earning approximately ₹1.80 crore in interest alone.