Many investors dream of accumulating ₹1 crore within 10 years. One of the most effective ways to achieve this goal is through a Systematic Investment Plan (SIP) in mutual funds. But how much should you invest every month to hit this milestone? Let’s break it down.
Step 1: Understanding SIP and Its Power
A SIP allows you to invest a fixed amount regularly in a mutual fund. Thanks to compounding, even moderate monthly contributions can grow significantly over time. The longer you invest and the higher the returns, the faster your wealth multiplies.
Step 2: The Formula
The future value of a SIP can be calculated using:
FV=P×(1+r)n−1r×(1+r)FV = P \times \frac{(1 + r)^n - 1}{r} \times (1 + r)FV=P×r(1+r)n−1×(1+r)
Where:
FVFVFV = Future Value (target ₹1 crore)
PPP = Monthly SIP contribution
rrr = Monthly rate of return (annual return ÷ 12)
nnn = Total number of months (years × 12)
Step 3: Assumptions
Investment horizon = 10 years → n=120n = 120n=120 months
Expected annual return = 12% → monthly rate r=1%=0.01r = 1\% = 0.01r=1%=0.01
Step 4: Calculation
Calculate (1+0.01)120≈3.3(1 + 0.01)^{120} \approx 3.3(1+0.01)120≈3.3
Subtract 1 → 2.3
Divide by 0.01 → 230
Multiply by 1.01 → 232.3
FV=P×232.3FV = P \times 232.3FV=P×232.3 P=1,00,00,000/232.3≈₹43,000P = 1,00,00,000 / 232.3 \approx ₹43,000P=1,00,00,000/232.3≈₹43,000
Step 5: Conclusion
To reach ₹1 crore in 10 years at 12% annual return, you need to invest approximately ₹43,000 per month.
Tips to Make SIPs Work for You
Start Early – Even a few months’ delay can increase required contributions.
Choose High-Quality Mutual Funds – Equity mutual funds generally offer higher long-term returns.
Review Annually – Monitor your SIP performance and adjust contributions if needed.
Stay Disciplined – Don’t stop your SIPs during market fluctuations; compounding works best with consistency.
Diversify – Consider a mix of equity, debt, and hybrid funds for risk management.
FAQs
Q1. Can I accumulate ₹1 crore with a smaller SIP?
Yes, but you may need a longer investment horizon or higher returns.
Q2. What if returns are less than 12%?
Lower returns will require higher monthly contributions or extended duration to reach ₹1 crore.
Q3. Are SIP returns guaranteed?
No. Returns depend on market performance, especially in equity mutual funds.
Q4. Can I increase my SIP over time?
Yes, gradually increasing your SIP contributions can help achieve your goal faster.
Q5. Is 10 years enough to accumulate ₹1 crore with SIP?
At a disciplined 12% annual return, 10 years is sufficient with ₹43,000 per month. Longer durations reduce monthly investment requirements.
Published on : 24th September
Published by : SMITA
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