The dream of becoming a millionaire is no longer limited to the wealthy. With proper financial planning, patience, and regular investments, any middle-class individual can achieve this goal. The biggest truth of the investing world is that the earlier you start, the faster your wealth will grow. SIP (Systematic Investment Plan) is a powerful tool that can help you gradually become wealthy without any significant burden. It doesn’t require a large investment at once; instead, a small investment every month can create a substantial fund for the future.
How does money grow
The biggest weapon of SIP is compounding. In this, you earn interest not only on your original investment but also on the interest you earn. This can also be called the “magic of compounding.” Furthermore, SIP also reduces the risk of market volatility because you purchase units at different market levels.
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A Monthly SIP of ₹30,000
Suppose you start a monthly SIP of ₹30,000 today and earn an average annual return of 12%. By this calculation, your total investment by the end of 8 years would be ₹28,80,000. After adding the estimated returns, your total fund would reach around ₹47,99,000. While your money has almost doubled, you are still a long way from your goal of ₹1 crore. This means that just 8 years is not enough to become a millionaire if your investment amount remains constant.
The Path to Becoming a Millionaire
If you extend your investment by just 5 more years, meaning you continue investing for a total of 13 years, the picture will change completely. At a 12% annual return, your total investment after 13 years would be approximately ₹46.8 lakh. But here, compounding will truly work, generating returns of over ₹66 lakh. This will bring your total wealth to over ₹1.12 crore. This is the effect of time, where your profits become larger than your original investment.
Achieve your ₹1 crore goal in just 10 years
If you don’t want to wait 13 years, a Step-up SIP (Subscribe SIP) is the best option. As your salary or income increases, you should increase your SIP amount by 10% every year. If you start with ₹30,000 and increase it by 10% every year, with a 12% return, you will build a corpus of ₹1 crore in just 10 years. This method not only strengthens your savings habit but also has the power to fulfill your dreams ahead of time.
Note: As important as starting a SIP is, it’s even more important not to interrupt it. People often panic when they see a market decline and stop investing, even though it’s during a downturn that you can get more units at a cheaper rate. Always invest for the long term, keeping your financial goals in mind, and seek the help of a good financial advisor.
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