How To Earn 1 Crore With systematic investment plan (SIP) - GetSkillFeed

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Friday, May 29, 2020

How To Earn 1 Crore With systematic investment plan (SIP)


How To Earn 1 Crore With Mutual Fund SIP...

How much to save to become a crorepati : it's true and you can also make it possible. There are different ways to save one Crore or even more over the long term .to save RS 1 Crore or to save RS 5 Crore or even more ,you need to keep saving regularly and use the potential of the equity asset class to achieve your objective over the long term. To ensure you are able to save regularly, it is better to start a systematic investment plan (SIP) in equity mutual funds which can help you save RS 1 Crore over the long term.

How much to invest in SIP:

Assuming a return of 12 percent from equities, one can get RS 1 Crore by investing about RS 5500 every month for 25 years. If you wish to accumulate RS 1 Crore over 30 years, then the same can be achieved by investing RS 2900 per month. 
However if you are not in a position to save a higher amount in the initial years you can still accumulate RS 1 Crore. Also if you are able to save RS 5500 per month but want to get RS 1 Crore in shorter duration, then also it can be achieved. There is a simple way to do this. 
You need to increase your monthly SIP amount each month by a certain percentage. For that you need to start with a lesser amount and later on increase the monthly SIP amount at a regular interval. 
In the above example, one can start a monthly SIP of RS 4300 and then increase the SIP amount by 3 percent each month the result is the same as the accumulated corpus will be about RS 1 Crore. 

As we saw in the above example it take 25 years for someone to save RS 1 Crore by investing RS 5500 every month at an assumed growth rate of 12 percent per annum. Now if someone wants to save RS 1 Crore in lesser time for example in 20 years by investing the same amount of RS 5500 the monthly increase in SIP amount needs to be about 9 percent. 
Increasing SIP method help to create a higher corpus for example if someone has a SIP of RS 5000 for 20 years at an assumed growth rate of 12 percent per annum on a total investment of RS 12 lakh over 20 years the amount at the end of the tenure will become approximately RS 50 lakh now with a 10 percent increasing SIP on a total investment RS 34,36,500, the amount at the end of the tenure will be nearly RS 1 Crore. 
While the initial amount is low in increasing SIP method the SIP amount in the later years becomes high. Also in practice when one decides to increase by a certain percentage not all fund houses or scheme when you choose to go for this approach ensure that the fund house has the step-ups SIP scheme. 
Also choose to go for smaller increase as after a few years the monthly SIP could become a sizeable amount you can also use any of the SIP calculators that come with the option to increase the SIP amount to get an idea as to how much will be the SIP amount in later years. Although with age and as one moves up in career, the propensity to save may also increase increasing SIP method comes handy in taking care of inflationary impact on your savings too.

SIP is a power of compounding actually compounding refers to the reinvestment of earnings at the same rate of return to constantly grow the principal amount year after year. It is a techniqe of making your money work harder for you and is perhaps the most powerful tool that an act investors can use to plan for many of life's financial , including retirement.  
Now let's have a example : 
Sameer and Sanjay are friends who have just started their career at 20 and plan to retire at 65. Sameer starts saving RS 5000 every year from age 20 and continue to do so until he is 35 years old after which he stops making any further investment. Sanjay on the other hand starts saving RS 12000 every year from the age of 35 and continues to do so until he retires at the age of 65 if both earn say 12% per annum on their investment, which of them would be wealther when they retire at 65? Sameer surprising isn't it? At 65 Sameer would have accumulated 36.43 lakh whereas Sanjay wealth would have been lower at 32.44 lakh. 
The result would be the same even if one considers a one time investment. For example assume that Sameer invest RS 10000 at the age of 20 in an instrument that fetches 15% per annum Sanjay on the other hand invests RS 100,000 at the age of 40 in the same instrument when both turns 60 sameer's RS 10,000 investment would have grown to RS 26.78 lakh while Sanjay RS 1 lakh would have grown to only RS 16.36 lakh. 

This the longer you stay invested the more money you will make the best way to take benefit of compounding is to start saving and investing wisely as early as possible. The earlier you start investing the greater will be the power of compounding. 

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