What if all you had to do was invest Rs. 1,000 every month to become a crorepati? Does it sound too good to be true? Well, with a Systematic Investment Plan (SIP) in a mutual fund, it is possible. Long-term SIP investment in an equity mutual fund can allow you to build wealth for your future and meet various financial goals. But how can Rs. 1,000 amount to Rs. 1 crore? Let’s find out.
SIP calculator: How to build a corpus of Rs. 1 crore
Equity mutual funds tend to offer returns of around 12 percent in the long term. However, for a very long investment horizon, these returns can go up to between 15 and 18 percent. This also depends on the kind of mutual fund scheme you select. So, if you invest in mutual funds through a monthly SIP of Rs. 1,000 for about roughly 33 years, you will be able to build a corpus of Rs\. 1 crore, considering the returns are around 15%.
To reach your Rs. 1 crore goal in a shorter timeline, you can consider opting for the step-up SIP option. This allows you to increase your SIP amount by a predetermined amount or percentage at predetermined intervals. So, as your income increases, your SIP investment also increases. For instance, if you would opt for a 15% SIP step-up annually, you would reach this goal in about 26 years instead of 33.
The step-up SIP option allows you to begin with a small amount that you are comfortable with right now and gradually keep increasing the SIP amount in a way that your investment goals are met quickly and more effectively.
Things to keep in mind
- You can use an online SIP calculator to try different SIP amounts and investment periods to determine what works the best for your financial goals.
- Make sure to look at the mutual fund’s objective. Different mutual funds have different objectives based on which the fund manager undertakes asset allocation. For your goal of becoming a crorepati over the long term, look for funds with a long-term wealth creation objective.
- Equity mutual funds come with a higher level of risk. Hence, the long-term investment horizon is important not just to build the corpus of Rs. 1 crore but also to give your mutual fund investment time to recover from short-term market fluctuations.
- You should look at investing in more than one SIP mutual fund depending on your goals and current investment portfolio. It will help with diversification and also to meet your corpus goal quickly.
Final words
While your SIP mutual fund investment is for the long-term, make sure you review your fund’s performance regularly. Sometimes, due to some fundamental changes or due to prolonged underperformance of the fund, it may be necessary for you to exit that fund and invest in another fund.
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