Mutual Funds: The practice of making SIP investments in mutual funds has become much more popular these days. Mutual funds are regarded as one of the greatest investing possibilities even though they are dependent on the market.
Wealth Accumulation through Long-Term Investing
Long-term investing can help you amass significant wealth. The average return on mutual funds, according to most experts, is 12 percent, which is better than any strategy. Through SIP, you can invest a certain amount in mutual funds each month. What is the estimated return on a Rs. 5,000 SIP that is started and maintained for 15, 20, 25, and 30 years?
Returns Here
- If you make a consistent monthly SIP investment of Rs 5,000 for 15 years, you will have invested a total of Rs 9,00,000 over that time. You would receive interest on this investment of Rs 16,22,880 at a rate of 12 percent, and after 15 years, you will receive a total of Rs 25,22,880.
- You will invest a total of Rs 12 lakh in mutual funds through SIP if you continue investing for 20 years, but at a 12 percent return, you will receive a return that is more than twice as high. After 20 years, the interest you receive will amount Rs 49,95,740, and you will receive a total of Rs 37,95,740 as interest.
- Your entire investment will be Rs 15,00,000 if you keep making this commitment for 25 years, but you will only be able to receive interest of Rs 79,88,175 at a 12 percent return. After 25 years, you will receive a total of Rs 94,88,175 (interest and the amount you invested).
- At the same time, you can add more than Rs. 2.25 crores if you keep investing consistently for 30 years. In thirty years, your total investment will be Rs 18,00,000, but the only interest you would receive will be Rs 1,58,49,569 at a rate of 12 percent. In this manner, you would receive a total of Rs 1,76,49,569 in 30 years.
SIP Benefits
The first benefit of SIP is that it offers flexibility in terms of both investment quantity and period. That is, depending on your convenience, you can select a monthly, quarterly, or half-yearly investing period. In addition, you can stop it and take money out of your SIP whenever you need to.
Rupee cost averaging works in your favour when you invest periodically. In other words, you will receive a larger number of units if you invested during a period of market downturn, and a smaller number of units if the market is increasing. Your costs stay consistent despite changes in the market. This implies that even if the market declines, you do not lose money. When the market increases in such a scenario, you have the opportunity to receive higher returns on your average investment.
In SIP, compounding has enormous advantages. As a result, SIP should be carried out for an extended period of time; the longer, the larger the compounding benefit. You receive returns on more than just your initial investment when you use compounding. Instead, you receive returns on the previous returns as well.
With SIP, you can learn to save for a predetermined amount of time. Specifically, you can save the full amount of money you have to invest each month, every three months, or half a year before spending the remaining amount. In this manner, you develop the disciplined investing habit.
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