With a structured plan and a consistent investment of Rs 10,000 per month, you can aim for a retirement corpus exceeding Rs 1 crore. Curious to know how it can be? Read to find out
Investing early and consistently, even if you earn a modest monthly salary, can create wealth over time thanks to the power of compounding. Many people underestimate the potential of a small SIP (Systematic Investment Plan) believing that only large amounts will yield significant returns.
However, with a structured plan and a consistent investment of Rs 10,000 per month, you can aim for a retirement corpus exceeding Rs 1 crore. Curious to know how it can be? Let’s take a closer look at how small, disciplined investments can pay off and why you can start as soon as possible to generate gradual returns.
Compounding is often referred to as the ‘eighth wonder of the world’ in the world of finance. Typically, it is the process where your investment generates returns, and those returns start generating more returns. This can also be understood as the ‘snowball effect’ which means that the earlier you start investing, the more significant the impact of compounding will be on your returns. Even small investments when made regularly will build up to a substantial wealth over time.
Financial advisors would tell you to start investing early, even if the amount invested is not large. And this is where SIPs come in handy. It gives you the flexibility of starting as low as Rs 500 or Rs 1,000 in many funds. But make sure these align with your investment ideology and keep within your budget. By setting aside as much as Rs 10,000 monthly in an SIP, you can give your wealth enough time to grow and accumulate.
Consider this: Let’s calculate how much a monthly SIP of Rs 10,000 could grow over different time frames using a SIP calculator. We will factor in an average annual return of 12 per cent (a common assumption for equity-based SIPs)
Calculating a Rs 1 crore corpus with Rs 10,000 Monthly SIP
How long would it take for you to generate returns worth in crores with a monthly SIP of Rs 10,000 if you were to begin today? Using Angel One SIP calculator we find that;
Time Required to Reach Rs 1 crore: Around 21 years
Total Investment Amount: Rs 25,20,000
Calculating a Rs 1 crore corpus with Rs 10,000 Monthly SIP
How long would it take for you to generate returns worth in crores with a monthly SIP of Rs 10,000 if you were to begin today? Using Angel One SIP calculator we find that;
Time Required to Reach Rs 1 crore: Around 21 years
Total Investment Amount: Rs 25,20,000
Total Gains through Compounding: Around Rs 88,66,742
The total value of your investment after 21 Years will be around Rs 1 crore. The example highlights that with consistent SIPs, you don’t need to invest an enormous amount upfront. Instead, the journey to Rs 1 crore is achievable by maintaining consistency and letting compounding work its magic.: Around Rs 88,66,742
The total value of your investment after 21 Years will be around Rs 1 crore. The example highlights that with consistent SIPs, you don’t need to invest an enormous amount upfront. Instead, the journey to Rs 1 crore is achievable by maintaining consistency and letting compounding work its magic.
What would be your investment return with Inflation-adjusted SIP calculations?
If we were to account for inflation, the Rs 1 crore you are targeting today might need you to either invest a higher amount or wait a few more years. Assuming an inflation rate of around 6 per cent, the future equivalent of Rs 1 crore might be close to 1.8 crores in 20 years.
To achieve this target, you may need to increase the SIP amount periodically - a method known as a step-up SIP. With an annual SIP increase of 5 per cent (or whatever suits your budget), you could stay on track to preserve the real value of Rs 1 crore even as inflation erodes purchasing power.
By adopting inflation-adjusted SIPs, you not only protect your future wealth but also create a more realistic investment plan to maintain the lifestyle you envision.
However, even without any step-up SIP plan, you could generate over Rs 1 crore corpus by investing Rs 10,000 monthly for a period of 35 years (inflation-adjusted).
Over a period of 21 years if you invest Rs 10,000 you would generate a return of Rs 49.5 Lakhs. In about 35 years, with the same investment amount, you will amass Rs. 1,38,02,901 (around Rs 1.4 crores).
Please note that these calculations have been done using an online SIP calculator, before investing you must check your budget, and requirements, or consult financial advisors to create a plan. You can also use a SIP calculator to see how much investment is needed to generate your desired corpus.
SIP allows you to start with a relatively small amount which reduces the financial strain and provides a manageable path to savings. The ‘systematic’ nature of SIP, coupled with its flexibility in increasing contribution over time makes it an accessible option for all categories of people from salaried individuals to self-employed professionals.
Unlike lump-sum investments, SIP also reduces the market timing risks since investments are spread over time. This strategy, called rupee-cost averaging mitigates the impact of market volatility allowing investors to build wealth over time.