If we tell you that you can make 10 lakh rupees by investing only 2000 rupees every month, you might think it is a joke. But this is possible by investing in a Systematic Investment Plan (SIP). Let us tell you how you can become a millionaire with such a small amount. Also, what is SIP and how does it work?
SIP is a plan where you invest a fixed amount every month. This amount can be 1 thousand rupees or more. You decide how often you want to invest – every month, every three months, or every year. In SIP, the amount is invested on a fixed date.
Through SIP, you can build a large amount and get good returns. The special thing about SIP is that you earn returns on both the money you invest and the profit you make. This is called compound interest.
How does SIP work?
Whatever you invest in SIP, the fund manager will put that money in a mutual fund. Suppose you invest 1,000 rupees and the net asset value (NAV) of the mutual fund is 20 rupees. You will get 50 units of that fund for 1,000 rupees. When the NAV of the fund goes up, your returns will also increase.
How can you make 10 lakh rupees from a SIP of 2,000 rupees?
Now, let us explain how you can make 10 lakh rupees by investing 2,000 rupees in SIP. Suppose you get an average annual return of 12%. In this case, you can make a total of 10 lakh rupees in about 15 to 16 years.
The calculation will be like this:
- Investment: Rs 2,000/month
- Interest: 12% per year
- Total investment: Rs 3.6 lakh
- Total profit: Rs 6.49 lakh
- Total amount: Rs 10.09 lakh
Here, we have calculated with a 12% return. If your return is higher, you can reach 10 lakh rupees faster. Also, if you invest more money or invest regularly at a fixed time, you can earn more than 10 lakh rupees in fewer years.