Investing in Systematic Investment Plans (SIPs) is one of the most effective ways to accumulate wealth over time, especially if you have a long-term financial goal like saving ₹50 lakh in 10 years.
How SIPs Work
Regular Investment: SIP allows you to invest a fixed amount every month in mutual funds.
Compounding Benefit: Earnings are reinvested, helping your corpus grow exponentially over time.
Flexibility: You can start, stop, or increase your SIP amount depending on financial situations.
Calculating How Much to Invest
Assuming an average annual return of 12%, which is typical for equity mutual funds, here’s an approximate SIP calculation:
Target Amount: ₹50,00,000
Investment Duration: 10 years
Expected Annual Return: 12%
Monthly SIP Required: ~₹25,000–₹27,000
Note: Returns can vary depending on market conditions. Using a financial calculator or mutual fund SIP calculator is recommended for precise planning.
Tips to Maximise SIP Returns
Start Early: The earlier you start, the lower your monthly investment needs to be.
Choose the Right Fund: Equity-oriented mutual funds tend to deliver higher long-term returns.
Increase SIP Gradually: Use annual increments to account for inflation and boost your corpus.
Avoid Panic Selling: Stay invested during market volatility to maximize compounding benefits.
Diversify Portfolio: Combine large-cap, mid-cap, and hybrid funds to balance risk and returns.
FAQ
Q1. Can I achieve ₹50 lakh in 10 years with a lower monthly SIP?
A: Only if your fund delivers higher returns than expected, but higher returns usually come with higher risk.
Q2. What if I miss a few SIP installments?
A: Missing SIPs may reduce your final corpus, so it’s advisable to resume or increase installments to compensate.
Q3. Which type of SIP is better for long-term wealth?
A: Equity SIPs generally offer the best potential for long-term wealth creation.
Q4. Can I start with a smaller SIP and increase later?
A: Yes, starting smaller and increasing SIP over time is a smart strategy to cope with inflation and income growth.
Q5. Are SIP returns guaranteed?
A: No, mutual fund returns depend on market performance and are not guaranteed.
Published on : 25th October
Published by : SMITA
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