Every person wants their future to be financially secure and to live a life free from money worries. Most people who dream of becoming rich work hard and save, but due to not choosing the right investment options, their money doesn’t grow as quickly as it could. In such a situation, SIP in mutual funds emerges as an option that helps build a strong fund over the long term.
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Why is SIP investment a smart decision?
SIP, or Systematic Investment Plan, is a method where a fixed amount is invested every month. It teaches the investor discipline and prevents them from panicking due to market fluctuations. The biggest advantage of SIP is that you can start investing with a small amount and achieve a big goal over time.
What is the 21x10x12 formula?
The 21x10x12 formula is a simple calculation for SIP investment. Here, 21 means investing for 21 years, 10 means a monthly SIP of Rs. 10,000, and 12 means an average annual return of 12 percent. This formula shows how regular investment and the right use of time can make someone a millionaire.
How does compounding grow your money?
Compounding plays the most important role in long-term investments. It not only provides returns on your principal investment but also adds returns on the previously earned returns. This is why the earlier you start an SIP, the more benefit you get. Over time, your money starts growing rapidly.
How much will the total fund be?
If a person starts a monthly SIP of Rs. 10,000 at the age of 30 and continues it for 21 years, the total invested amount will be approximately Rs. 25.20 lakhs. If this earns an average annual return of 12 percent, then through compounding, this amount can grow to approximately Rs. 1.04 crore. This means that the goal of becoming a millionaire can be achieved by the age of 51.
Higher returns mean greater benefits
The returns on mutual fund SIPs depend on the market. Many funds have given returns of 14 to 18 percent over the long term. If the returns are higher than expected, your fund can grow to be much larger than the target. This is why SIPs are considered a reliable investment option for the long term.
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Consistency and patience are the keys to success
The most important factors for building a large fund through SIPs are consistent investment and patience. Stopping investments midway or panicking when the market falls can affect the goal. If the investor continues investing with discipline, the 21x10x12 formula can make them financially strong.