Often, people think that a large amount can be created by investing a large amount every month in SIP. However, this is not the case; a big fund can be created even by a small amount SIP in the equity scheme of a mutual fund. This happens due to the compounding calculation. Many people call it the magic of compounding. You can start SIP with an investment of less money.
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A big fund will be created by small investments in the long term
If you invest Rs 1000 every month in SIP, then you can create a fund of Rs 2 lakh. It gives an annual return of 12 percent. There is a compounding calculation in it, due to which the return keeps increasing. This is also called the magic of compounding.
If you invest Rs 1000 every month for 1 year and 4 years, then you will invest a total of Rs 48000. In this time, with a 12 percent annual return, the investment will increase to Rs 61,015. That is, you will get a return of Rs 13,015 on the investment, which is not wrong for a short period of 4 years.
Create a fund of just 2 lakhs with an SIP of Rs 1000
If you want to create a fund of Rs 2 lakh by investing in SIP, then you have to invest Rs 1000 every month for 10 years. You will invest a total of Rs 1,20,000 in 10 years. At the rate of 12 percent annual return, you will get a total return of Rs 1,04,036. According to this, by investing just Rs 1,000 every month, a total fund of Rs 2,24,036 will be ready in 10 years. However, you have to keep in mind that the return of mutual funds depends on the performance of the stock market. In such a situation, the return can be more or less.
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Money will grow quickly due to the power of compounding
According to experts, if you invest a small amount every month in SIP, a big fund can be created in the long term. You can invest every month as per your convenience. By doing this, you can create a big fund. In this, the money will grow quickly with the help of the power of compounding. However, you will have to invest regularly every month.