Every individual dreams of becoming wealthy, but only a few successfully realize this dream. For those belonging to the middle-class, working day jobs, and envisioning a future millionaire self, Systematic Investment Plans (SIP) in mutual funds offer a promising avenue.
Why SIP is Preferred by Experts:
SIPs allow you to invest in mutual funds periodically, be it monthly, quarterly, or yearly. Even though SIP investments are linked to market performance, a majority of experts believe it to be one of the best investment methods in today’s times. The longer your investment tenure in SIP, the more substantial returns you’re likely to witness. Thanks to the magic of compound interest, your invested sum can rapidly grow over the years. On average, SIPs have been known to offer returns of about 12%, which is comparatively higher than many other investment schemes. Over time, consistent SIP investments can indeed transform you into a millionaire.
How Much to Invest and When to Expect Returns?
- Investing ₹5000 monthly: If you start a SIP with a monthly investment of ₹5000, and continue this for 26 years, considering a return rate of 12%, you can expect approximately ₹1,07,55,560. In this scenario, your total contribution would be ₹15,60,000.
- Investing ₹8000 monthly: Elevate your monthly investment to ₹8000, and you could become a millionaire in just about 22 years. In this period, you would have invested a total of ₹21,12,000, but thanks to the 12% return, you can expect around ₹1,03,67,167.
- Investing ₹10,000 monthly: Those with higher earning potential can consider a monthly SIP of ₹10,000. Here, in a span of 20 years, with a total investment of ₹24,00,000, one could reap close to ₹99,91,479, nearly touching the crore mark. If continued for 21 years, the returns could be approximately ₹1,13,86,742.
The Flexibility of SIP:
One of the distinctive features of SIP is its flexibility. As per financial expert Deepti Bhargav, to maximize returns, one should consider increasing their SIP amount annually, even if it’s a nominal increase of ₹500. Such increments aren’t challenging as, typically, one’s income also grows over time. Moreover, while the average return from SIP is 12%, if you manage to gain even higher returns, your money will grow even faster. Another advantage is the option to pause your SIP when needed and resume it whenever you’re ready, ensuring that your financial journey remains uninterrupted and tailored to your needs.
