SIP (systematic investment plan) is an investment plan to invest a small amount in mutual funds regularly. Instead of investing a large amount at one time, you can choose to invest weekly, monthly, quarterly, half-yearly, or yearly. Before starting an SIP, an investor should decide their goal. This can be for retirement, education, buying a car or house, or for any other purpose. You should also decide the duration of your SIP to fulfill your financial goals. One of the best things about SIP is it can make you a disciplined investor while you can also take the benefit of compounding.
SIP has several benefits. Some of them include:
Power of compounding: Because of compound interest, your money can grow multiple times over some time. This is calculated on the principal and the interest accumulated over the previous period.
Flexible investment amount: In SIP, you can adjust your investment amount as per your capability.
Market knowledge: To invest in an SIP, you don’t need to have too much market knowledge.
Diversification: You can diversify your portfolio to minimise the risk.
Rupee cost averaging in SIP: With the rupee cost averaging method you can take advantage of market volatility. This means when you invest a fixed amount regularly, SIP can average out the value of each unit.
Minimum investment in SIP and annual returns estimations
There is no limit to the amount you can invest in a SIP. The minimum amount that you can invest is Rs 500 per month. You can get around 12-15 per cent annual returns in the SIPs.
Rs 3,000 Monthly SIP for 30 Years vs Rs 30,000 Monthly SIP for 10 Years
This article will compare two monthly SIP investments- Rs 3,000 monthly for 30 years and Rs 30,000 monthly for 10 years. The annualised return in each case will be 12 per cent. Let’s see which one gives higher returns.
What will be the corpus from Rs 3,000 monthly SIP investment in 30 years?
In 30 years, you can accumulate Rs 1,05,89,741 by investing Rs 3,000 per month. The total investment in 30 years will be Rs 10,80,000 and the total estimated returns will be Rs 95,09,741.
What will be the corpus from Rs 30,000 monthly SIP investment in 10 years?
In 10 years, you can accumulate Rs 69,70,172 by investing Rs 30,000 per month. The total investment will be Rs 36,00,000 and the total estimated returns will be Rs 33,70,172.
Investing in mutual funds is subject to market risks. Consult your advisor before making any investment.
