Systematic Investment Plan (SIP) is a popular investment strategy in India that allows you to invest a fixed amount of money regularly in a mutual fund scheme. It inculcates discipline and consistency in your investment approach, making it a powerful tool for wealth creation in the long term. This article explores the potential of SIPs and how they can help you achieve your financial goals.
Understanding SIP Returns
One of the biggest advantages of SIP is the power of compounding. When you invest regularly through SIP, your returns get reinvested, earning returns on the returns themselves. This significantly boosts your wealth over time. Let’s consider an example to illustrate this concept:
Investment Scenario
- Monthly SIP amount: Rs 2,700
- Expected annual return: 15%
| Duration | SIP Amount (₹) | Future Value (₹) |
|---|---|---|
| 5 years | 2700 | 2.4 Lakhs |
| 10 years | 2700 | 7.5 Lakhs |
| 15 years | 2700 | 18.3 Lakhs |
| 20 years | 2700 | 40.9 Lakhs |
| 25 years | 2700 | 88.7 Lakhs |
| 28 years | 2700 | 1.4 Crores |
| 30 years | 2700 | 1.9 Crores |
As you can see, even with a moderate monthly investment of Rs 2,700, consistent investing through SIP for 30 years can potentially help you accumulate a corpus of Rs 1.9 crore, assuming a 15% annual return.
Decoding the Explained Amount:
- Expected Amount (Rs. 18,926,516): This represents the total maturity value you can expect after 30 years of investing through SIP, considering the assumed return rate.
- Amount Invested (Rs. 9,72,000): This is the total amount you would have invested through SIP over 30 years.
- Wealth Gain (Rs. 17,954,516): This indicates the potential profit you can earn from your SIP investment over 30 years. It’s calculated by subtracting the total invested amount from the expected maturity value.
SIP vs Popular Investment Options in India
SIPs offer several advantages over traditional investment options like fixed deposits (FDs) or savings schemes. Here’s a comparison to help you understand:
| Investment Option | Interest Rate (%) | Features |
|---|---|---|
| Sukanya Samriddhi Account Scheme | 8.2 | For girl child only, maturity period 21 years |
| Senior Citizen Savings Scheme | 8.2 | For senior citizens only, quarterly interest payout |
| National Savings Certificate (VIII Issue) | 7.7 | Fixed maturity period, interest compounded annually |
| Kisan Vikas Patra | 7.5 | Maturity period of 115 months |
| Mahila Samman Savings Certificate | 7.5 | For women only, maturity period of 8 years |
| SIP (Mutual Funds) | Avg 12-15% | Flexible investment horizon, potential for higher returns |
SIPs offer potentially higher returns compared to traditional options. However, they are subject to market fluctuations.
Disclaimer: (This information is provided solely for informational purposes. It is important to note that investing in the market or a business idea involves market risks. Before investing money as an investor/ owner/ partner, always consult an expert. DNP News Network Private Limited never advises to invest money on stocks or any specific business idea. We will not be liable for any financial losses.)
