Do you want to create a fund of lakhs by saving a little every month, Systematic Investment Plan (SIP) can make your dream come true. Believe me, even a monthly SIP of just ₹5,000 can create a fund of lakhs in the long term with the magic of compounding. Let us know how much time it will take you if you want to create a fund of ₹25 lakhs, and what special planning will have to be done for this.
How to create a fund of ₹25 lakhs from a ₹5,000 SIP
SIP is a method of investment in which you invest a small amount in mutual funds every month. The return on this investment gets reinvested, which also gives a return on your principal and the return on it. This is called the magic of compounding, which increases your money amazingly in the long term. It is possible to get an average return of 10% to 15% in the stock market in the long term.
How long will it take to create a fund of ₹25 lakh
Let us calculate at different return rates how long it will take to create a fund of ₹25 lakh from a monthly SIP of ₹5,000:
- If you get an estimated return of 10% per annum, it will take you about 20 years to create a fund of ₹25 lakh.
- If you get a return of 12% per annum, this target will be achieved in about 17 years.
- If you get a great return of 15% per annum, you can create a fund of ₹25 lakh in just 15 years.
Easy ways to quickly create a fund of ₹25 lakh
If you want to create a fund of ₹25 lakh even faster, there are two very effective ways for this. Start a monthly SIP of ₹7,000 or ₹10,000 instead of ₹5,000. This will help you achieve your goal very quickly. Many mutual funds have a SIP step-up option. This means that you can increase your SIP amount by a certain percentage (eg 10%) every year. If you increase it by 10% every year, then a fund of ₹ 25 lakh can be created in just 12 to 13 years.
What things should be kept in mind while investing in SIP
It is very important to keep some things in mind to achieve any big goal. Keep these things in mind while investing in SIP:
- SIP is the most effective way in the long term. Patience is necessary for a big fund.
- The sooner you start investing, the less burden it will be on you.
- The value of ₹ 25 lakh may decrease after 15-20 years, so keep inflation in mind while setting a goal.
- Choose the right fund according to your risk profile. For this, taking advice from a financial advisor would be a wise step.
- Review your investments every year and make changes if needed.