Do you wish to create a significant sum on money through your mutual fund investments? Surely you do, after all, who doesn’t want to sit on a huge pile of cash to serve their financial goals. An investor has the option to invest in mutual funds either through the one-time investment of lumpsum investment or through systematic and disciplined investment of SIP investment. SIP investments allow investors to invest a small, insignificant sum of money over a period of time. In this article, we will focus on SIP or Systematic Investment Plan and how you can build an investment corpus of Rs 50 lacs in a span of just 10 years.
Shriya wishes to accumulate a sum of Rs 50 lacs to save for her child’s marriage. She has around 10 years to accumulate this sum of money. Let’s calculate the monthly amount needed to be invested by Shriya to accumulate a sum of Rs 50 lacs in a span of 10 years. SIP return calculators help investors to evaluate the monthly amount needed to achieve a desired sum of corpus. One can also use a mutual fund return calculator to understand the future value of their mutual fund investments. Using an SIP calculator, you would find that you would need to save and invest around Rs 21,000 each month to achieve a corpus of Rs 50 lacs in a span of 10 years. Over here, we have assumed that the average rate of returns offered by the mutual fund scheme is at 12% per annum. Note that, if you assume the average rate of returns at 15% per annum, then the same monthly investment amount would have decreased to just Rs 18,000 per month to achieve a corpus of Rs 50 lacs in a span of 10 years. As you can see, if you invest in mutual fund schemes that offer higher rate of returns, then either the monthly investment amount needed to invest to achieve a particular sum of money would decrease or the investment horizon would decrease. Irrespective of the mutual fund scheme you choose to invest in, you must ensure that the objective of the mutual fund scheme aligns with your risk profile, investment duration, and financial objectives. To understand the best mutual funds investment plans for your portfolio, you can take the help of a financial advisor or a mutual fund expert.
If Shriya is unable to save Rs 18,000 to Rs 21,000 in the initial years, she can always invest a lower amount and gradually increase her investment amount in a systematic manner. This is possible with the help of step-up SIPs. Step-up SIP or top-up SIP helps individuals to systematically increase their investment amount either by a fixed percentage or by a fixed number on a periodic basis. Hence, even if you do not have a significant amount to invest in mutual funds through SIP investment each month, you can still invest a small amount initially and gradually increase that amount and achieve your financial goals. Happy investing!