Many people believe that building a substantial corpus through a Systematic Investment Plan (SIP) requires making a large investment every month. However, even a small SIP in a mutual fund’s equity scheme can build a substantial corpus. This is due to the power of compounding, which many call the magic of compounding. Even if you don’t have a large sum to invest every month, you can start a SIP with a small amount.
The Miracle of Small Investments in the Long Term
You can build a corpus of ₹2 lakh by investing just ₹1,000 every month. The estimated annual return is 12%. Due to compounding, your money earns returns, increasing your monthly returns. This is called the magic of compounding. If you invest ₹1,000 every month for four years, your total investment will be ₹48,000. At an annual return of 12%, your investment will grow to ₹61,015 over this period. This means you’ll earn a whopping ₹13,015 return on your investment, which is a remarkable return for a short period of 4 years.
More than ₹2 lakh from a ₹1,000 SIP in just 10 years
If you want to build a corpus of ₹2 lakh through SIP investing, you’ll need to invest ₹1,000 every month for 10 years. Over 10 years, you’ll invest a total of ₹1,20,000. At an annual return of 12%, you’ll earn a total return of ₹1,04,036. Thus, investing just ₹1,000 every month will create a corpus of ₹2,24,036 in 10 years. It’s important to remember that mutual fund returns depend on the performance of the stock market, so returns may vary slightly. The power of regular investment over the long term is unprecedented.
The Power of Compounding Helps Your Money Grow Faster
Experts say that even a small amount invested every month through a SIP can build a substantial corpus over the long term. If you can’t invest a large sum, invest as much as you can comfortably afford each month. This can help you accumulate a significant corpus for your children’s education and retirement. The power of compounding will help your investments grow. You just need to focus on investing regularly.
Increasing your SIP amount is a boon for the future
The sooner you start investing, the more time your money will have to grow. Initially, the money grows slowly, but its growth rate accelerates. Experts say that a person’s income typically increases every year. Especially for employed individuals, salaries increase every year due to pay raises. As your salary increases, you can increase your SIP amount each year. This is called a step-up SIP. This will play a crucial role in building a substantial corpus over the long term, as you are accelerating your investment pace over time.