SIP: India is expected to become a USD 30-trillion economy by 2050 due to strong consumption and exports, according to HDFC Bank chairman Atanu Chakraborty. As the country strides toward this ambitious economic goal, individual investors are seeking avenues to grow their wealth steadily and reliably. One such avenue is Systematic Investment Plan (SIP), a disciplined approach to investing in mutual funds that has gained popularity among investors of varying financial backgrounds. Let’s delve into how SIP can help you accumulate substantial wealth over time.
Understanding SIP
SIP allows investors to regularly invest a fixed amount in mutual funds at predetermined intervals, typically monthly. It harnesses the power of compounding by investing small amounts regularly over an extended period. Despite market fluctuations, SIP ensures a disciplined investment approach, enabling investors to benefit from rupee cost averaging.
The Power of Compounding
Compounding is the snowball effect that occurs when earnings on an investment generate further earnings over time. It’s often referred to as “interest on interest.” The longer the investment horizon, the more pronounced the effects of compounding become.
SIP Returns Over Various Durations
Let’s explore how SIP can grow your wealth over different time frames, assuming an expected annual return of 17%.
| Duration | SIP Amount (₹) | Future Value (₹) |
|---|---|---|
| 5 years | 3100 | 2.9 Lakhs |
| 8 years | 3100 | 6.3 Lakhs |
| 10 years | 3100 | 9.8 Lakhs |
| 12 years | 3100 | 14.6 Lakhs |
| 15 years | 3100 | 25.7 Lakhs |
| 18 years | 3100 | 44.1 Lakhs |
| 20 years | 3100 | 62.7 Lakhs |
| 22 years | 3100 | 88.8 Lakhs |
| 25 years | 3100 | 1.5 Crores |
| 28 years | 3100 | 2.5 Crores |
| 30 years | 3100 | 3.5 Crores |
Accumulating Wealth with SIP
By investing Rs. 11,16,000 (11.2 Lakhs) over a period, you can amass significant wealth. Considering the expected annual return of 17%, your investment can grow to Rs. 3,37,82,758 (3.4 Crores). This demonstrates the power of consistent investing over the long term.
Disclaimer: (This information is provided solely for informational purposes. It is important to note that investing in the market or a business idea involves market risks. Before investing money as an investor/ owner/ partner, always consult an expert. DNP News Network Private Limited never advises to invest money on stocks or any specific business idea. We will not be liable for any financial losses.)