SIP investment no. 1 calculation trick that you should know (hidden secret)

Introduction: How Much Will You Get After 20 Years if You Deposit Rs 5000 Every Month in SIP investment?

Investing for future goals such as children’s education, marriage, and building a house has become crucial in today’s financial landscape. The earlier you begin investing, the greater the benefits you will reap. Among the various investment options available, Mutual Fund Systematic Investment Plans SIP investment stand out as a reliable choice. In this article, we will explore how much you can accumulate after 20 years if you deposit Rs 5000 every month in a SIP.

The Longer the SIP, the Bigger the Profit

Starting your SIP at an early age and maintaining it for an extended period can significantly enhance your financial growth. The return on SIP depends on several key factors, including the amount you invest each month, the duration of your investment, and the annual rate of return you earn. Let’s delve into how these factors impact your total returns over 20 years.

How Much Money Will You Get from a SIP of Rs 5000 After 20 Years?

To understand the potential returns, let’s consider two scenarios based on different average annual returns of SIP investment

Scenario 1: 12% Annual Return

If you invest Rs 5000 per month in an SIP investment with an average annual return of 12%, you could accumulate around Rs 49.95 lakh in 20 years. This amount includes your principal investment of Rs 12 lakh and returns of approximately Rs 37.95 lakh. The power of compounding plays a significant role in growing your investment over time.

Scenario 2: 15% Annual Return

If the average annual return increases to 15%, your total corpus after 20 years could reach Rs 75.79 lakh. In this scenario, your investment would remain Rs 12 lakh, but the returns would soar to approximately Rs 63.79 lakh. This illustrates how even a slight increase in the rate of return can substantially impact your overall wealth.

Importance of Starting Early

The earlier you start your SIP investment, the more you benefit from the power of compounding. Compounding ensures that your returns generate additional returns over time. For instance, if you start investing at the age of 25, by the time you reach 45, your investment would have grown significantly. Conversely, delaying your investment by just a few years can drastically reduce your total returns.

Considerations Before Starting an SIP

While SIPs are an excellent investment option, it is essential to consider a few factors before starting:

  1. Market Risks: SIP investment are subject to stock market risks. The performance of mutual funds can fluctuate based on market conditions. It is crucial to have a long-term perspective and not panic during market volatility.
  2. Capital Gains Tax: The returns generated from SIPs are subject to capital gains tax. Short-term capital gains (if units are redeemed within three years) are taxed at a higher rate than long-term capital gains (if units are redeemed after three years).
  3. Regular Monitoring: Regularly monitor your SIP investments and review your portfolio to ensure it aligns with your financial goals. Adjustments may be necessary based on changing market conditions and personal circumstances.
  4. Diversification: Diversify your investments across different mutual funds to spread risk and optimize returns. Avoid putting all your money into a single fund.

Benefits of SIPs

  1. Disciplined Saving: SIPs encourage disciplined saving by requiring regular monthly investments. This helps inculcate a habit of saving and investing.
  2. Rupee Cost Averaging: SIPs benefit from rupee cost averaging, where you buy more units when prices are low and fewer units when prices are high. This helps in reducing the average cost per unit.
  3. Flexibility: SIPs offer flexibility in terms of investment amount and duration. You can start with a small amount and gradually increase it over time.
  4. Convenience: Investing in SIPs is convenient and hassle-free. You can set up an SIP online, and the amount is automatically debited from your account each month
SIP investment.

More to read at https://groww.in/calculators/mutual-fund-returns-calculator

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Conclusion

Investing Rs 5000 every month in a SIP can help you accumulate substantial wealth over 20 years, thanks to the power of compounding and disciplined investing. While market risks and tax implications should be considered, the potential returns make SIPs an attractive investment option for achieving long-term financial goals. Start early, stay invested, and watch your money grow.

FAQs

Q1: What is a SIP? A Systematic Investment Plan (SIP) is a method of investing in mutual funds where you invest a fixed amount regularly, typically monthly.

Q2: How does compounding work in SIPs? Compounding in SIPs means that the returns generated on your investment start earning returns themselves, leading to exponential growth over time.

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