In today’s time, financial freedom is everyone’s dream, and becoming a millionaire is a part of that dream. Often, people think that for this, it is necessary to invest a huge amount of capital or directly in the stock market, which also has a high risk. But, do you know that through SIP (Systematic Investment Plan), you can create a huge fund in the long term, even by making small savings? This is an investment option that helps you systematically achieve your financial goals, without any big risk. Let us understand in detail how a SIP of just ₹ 10,000 every month can make you a millionaire.
How much return will you get on a SIP of ₹ 10,000
Let us understand the power of SIP with an example:
Suppose you invest ₹ 10,000 every month in a mutual fund SIP. You get an average return of 12% per annum (12-15% returns are considered normal in mutual funds). If you invest at this rate continuously for 25 years, the calculation will be something like this:
Total investment amount ₹10,000/month x 12 months x 25 years = ₹30,00,000
Total interest/return ₹1,40,22,066
Total maturity amount ₹1,70,22,066
This means that by investing just ₹30 lakhs, you can create a huge fund of ₹1.7 crores (over Rs 1 crore 70 lakhs)! This is the magic of the power of compounding.
How does the magic of compounding work
The biggest advantage of long-term investing in SIP is compounding. Compounding can also be understood as “interest on interest”.
How it works
In this, the return that you get on your original investment amount is also added to your investment. Then the next time interest is received on that increased total amount. In this way, your money grows very fast over time.
For example, in the initial 5 years, your money will grow slowly, but after 15-20 years, its growth will start happening very fast. Therefore, the longer the investment period, the bigger the returns. This is the “magic of time” that can turn even a small investment into a huge fund.
Why is a Mutual Fund SIP a sensible option
There are many reasons why a Mutual Fund SIP is a popular and sensible way of investing. Through a Mutual Fund SIP, you can start investing even with a small amount like ₹500 or ₹1000. This makes it accessible to investors of all classes. Investing money through Mutual Funds is less risky than investing directly in the stock market. This is because in a mutual fund, your money is invested in the shares of many different companies by a fund manager, which reduces the impact of market fluctuations. This is called diversification.
Investing in funds like ELSS (Equity Linked Savings Scheme) also provides tax benefits under Section 80C of the Income Tax Act, which reduces your taxable income. It is easy to stop SIP or withdraw your money when needed. Mutual funds have high liquidity, so you can easily withdraw money according to your needs. Your investments are managed by professional fund managers who have in-depth knowledge and experience of the market.
Strategy to become a millionaire through SIP
The sooner you start a SIP, the more the magic of compounding will work. Continue your SIP regularly, do not stop investing due to market fluctuations. Be disciplined towards your financial planning. Review your investments from time to time and change your fund or investment amount if necessary.