Systematic Investment Plan (SIP) strategy: Personal Finance experts often say it is hard to reach the first Rs 1 crore corpus through mutual fund SIP. Thereafter, the power of compounding works magically to multiply your wealth in a very quick time. So, is there a way to reach the Rs 1 crore goal fast?
One obvious way to reach the Rs 1 crore goal fast is by increasing the SIP amount in a big way. The second way would be to wait for the rate of return to increase dramatically. While the first option is in your hand, the second is beyond the control of investors. However, everyone may not be in a position to increase the SIP amount in a big way. So the best way is to increase the SIP amount incrementally, say by 5% or 10% annually.
A calculation in FundsIndia’s Wealth Conversation Report December 2022 shows that the number of years required to reach the Rs 1 crore goal reduces significantly if an investor increases the SIP even by 5% or 10% annually. Let’s have a look at how much time it will take to reach Rs 1 crore if you increase the SIP amount every year by 5% or 10%, assuming the Compounded Annual Growth Rate (CAGR) of your investment is 12%.
Increasing SIP by 5% annually
Rs 10,000 SIP: It would take 20 years 1 month to reach Rs 1 crore with Rs 10,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore 17 years 10 months at 12% interest.
Rs 20,000 SIP: It would take 15 years to reach Rs 1 crore with Rs 20,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore 13 years 5 months at 12% interest.
Rs 25,000 SIP: It would take 13 years 5 months to reach Rs 1 crore with Rs 25,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 12 years 1 month at 12% interest.
Rs 30,000 SIP: It would take 12 years 4 months to reach Rs 1 crore with Rs 30,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 11 years at 12% interest.
Rs 40,000 SIP: It would take 10 years 6 months to reach Rs 1 crore with Rs 40,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 9 years 6 months at 12% interest.
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Rs 50,000 SIP: It would take 9 years 2 months to reach Rs 1 crore with Rs 50,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 8 years 4 months at 12% interest.
Rs 75,000 SIP: It would take 7 years 1 month to reach Rs 1 crore with Rs 75,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 6 years 6 months at 12% interest.
Rs 1 lakh SIP: It would take 5 years 10 months to reach Rs 1 crore with Rs 1 lakh monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 5 years 5 months at 12% interest.
Increasing SIP by 10% annually
Rs 10,000 SIP: It would take 20 years 1 month to reach Rs 1 crore with Rs 10,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 10% annually would let you reach Rs 1 crore 15 years 10 months at 12% interest.
Rs 20,000 SIP: It would take 15 years to reach Rs 1 crore with Rs 20,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 10% annually would let you reach Rs 1 crore 12 years at 12% interest.
Rs 25,000 SIP: It would take 13 years 5 months to reach Rs 1 crore with Rs 25,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 10 years 10 months at 12% interest.
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Rs 30,000 SIP: It would take 12 years 4 months to reach Rs 1 crore with Rs 30,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 10 years at 12% interest.
Rs 40,000 SIP: It would take 10 years 6 months to reach Rs 1 crore with Rs 40,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 8 years 8 months at 12% interest.
Rs 50,000 SIP: It would take 9 years 2 months to reach Rs 1 crore with Rs 50,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 7 years 8 months at 12% interest.
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Rs 75,000 SIP: It would take 7 years 1 month to reach Rs 1 crore with Rs 75,000 monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 6 years 1 month at 12% interest.
Rs 1 lakh SIP: It would take 5 years 10 months to reach Rs 1 crore with Rs 1 lakh monthly SIP in a mutual fund scheme. Increasing the SIP amount by 5% annually would let you reach Rs 1 crore in 5 years 1 month at 12% interest.
(Disclaimer: The above content is for information purposes only. Mutual Funds are subject to market risks. There is no assurance or guarantee of returns from investing in any fund. Please consult your financial advisor before investing)