Do you wish to build wealth or maybe create a sizable corpus to fulfill your financial goals? Thanks to the power of compounding and disciplined investing through Systematic Investment Plans (SIPs), you can achieve this. Here is how to create a wealth of ₹ 1 crore in 10 years using SIPs.
Understanding SIP Investments
Systematic Investment Plan (SIP) is a method of investing a fixed amount periodically, usually every month in mutual fund schemes. SIP is one of the most effective and widely used instruments among investors who want to invest in mutual funds and build wealth.
SIPs make investors disciplined through automatic investments and enable them to reap the benefits of rupee cost averaging and compounding.
Creating a Wealth of ₹1 Crore in 10 Years through SIP often requires a combination of strategy, patience, and discipline.
Understanding the Power of Compounding
Compounding is the process through which returns are reinvested in the same scheme. It increases the investment amount and yields returns on returns.
This snowball effect increases the speed at which wealth is generated because the money invested multiplies over time. The compounding becomes highly effective and magnified by long time horizons and early commitment to the investment.
SIPs also offer these benefits as they provide a disciplined method of investing in mutual funds over the long term through systematic savings and re-investment.
How to Achieve ₹1 Crore in 10 Years?
Here is a step-by-step guide on how you can build a wealth of ₹1 Cr. in 10 years.
Step 1: Set Your Financial Target
In any investment strategy, it is crucial to set your financial target at the starting point. Whether the aim is to accumulate wealth for a child's education, save capital for retirement, or become financially secure, having a goal in mind will help in planning the investment and the road ahead.
This helps you understand which type of SIP schemes to invest in.
Step 2: Select the Appropriate SIP Mutual Fund
Choosing an appropriate mutual fund is a very important decision if you want to achieve your financial target. Investors should consider past performance, fund manager experience, reputation, expense ratio, objective of the fund, and volatility before selecting a SIP scheme.
Most investors select equity mutual funds as their preferred investment option for long-term investments due to their high returns.
Step 3: Calculate the Required Monthly SIP Amount
To reach ₹1 crore rupees in 10 years, you can use an SIP calculator or financial planning tool. The calculator will then help you determine the monthly SIP to be invested to meet your target.
For example, at the annual return of 11%, to save ₹1 crore rupees in 10 years, an individual would require approximately Rs. Rs.45,665 per month or should start a SIP of Rs.37,924 per month and increase this by 5% every year.
Step 4: Start Early and be Consistent
For a successful SIP investment, one must begin to invest early in SIP and maintain consistency in their investment plans.
Investors do not have to invest a large amount of capital at the start but rather start small and gradually increase the amount as their income grows because compounding is very powerful in the long run.
Step 5: Monitor and Review Periodically
Even though SIPs are for long-term financial planning and wealth building, it is good to sometimes revise the portfolio. Review whether the selected mutual fund is meeting the objectives or not and apply necessary amendments.
However, do not get carried away with the short-term market fluctuations to invest in anything that comes your way, because SIPs help to weather the storm of market volatility.
Benefits of Investing in SIPs
- Discipline and Regular Investing: SIPs help to develop investment discipline, where an investor decides the amount to invest, irrespective of the conditions in the market.
- Rupee-Cost Averaging: It enables investors to purchase more units when the price is low and fewer units when the price is high resulting in an average cost of a share hence minimizing the chance of investing at the peak of the market.
- Power of Compounding: It ensures that your investments grow to greater heights particularly when you are thinking of a long-term investment. Your returns are reinvested fetching you more returns.
- Flexibility and Accessibility: SIPs are accessible to investors with varying risk appetites and investment goals. They can start with small amounts, making SIPs accessible to everyone.
To Wrap Up
Achieving ₹1 crore in 10 years through SIPs is a realistic goal if you start early, invest consistently, and choose the right funds. It's a testament to the power of disciplined investing and the magic of compounding. With patience, dedication, and the right strategy, you can turn your dreams into reality.
Disclaimer: No Business Standard Journalist was involved in creation of this content
