Sip calculator: If you do SIP (Systematic Investment Plan) of ₹ 5,000 every month, can you make a fund of ₹ 10 lakh? The answer is- yes, you can make it at all. But it depends on how many years you invest and how much return you will get on it.
How much return possible in SIP?
The return in SIP is not fixed. It depends largely on the market move. But if we look at the average of the last 10–15 years, the equity mutual funds have given an annual return of up to 12% on an average.
We will assess according to three different returns:
- 8% (from defensive perspective)
- 10% (Moderate Estimate)
- 12% (aggressive estimate)
How long will it take to make a fund of ₹ 10 lakh?
| Monthly sip | Estimated return |
Time to become ₹ 10 lakh |
| ₹ 5,000 | 8% | 11 years 10 months |
| ₹ 5,000 | 10% | 10 years 3 months |
| ₹ 5,000 | 12% | 9 years 1 month |
Note: It is based on the calculation compounding theory. Tax, fund management fees or market voliticity have not been added to it.
Is it wise to increase SIP every year?
If you increase your SIP by 10% every year. For example, ₹ 5,500 next year, then ₹ 6,050, then a target of ₹ 10 lakh can be completed quickly. In about 7–8 years. This is called step-up sip, and is the best way for long-term goals.
What kind of funds to choose?
If you SIP with ₹ 5,000, Large & Mid Cap or Flexi Cap Funds can be good options. They are neither very risky nor very low returns. If the small cap or mid cap funds move, more returns can be found. However, it also has high risk.
What is SIP?
SIP ie Systematic Investment Plan is a way of investing in a long term in long term. In this, you invest a fixed amount in a mutual fund every month, which increases your capital over time. The aim of SIP is that you can make an investment habit without putting a lump sum amount.
This method gives the benefit of Rupee Cost Averaging and Compounding, which can give good returns in a long time. SIP is especially beneficial for those people, want to create large funds in a longer period with discipline.
The real advantage of SIP is visible when you continue it for a long time. This investment becomes a habit and investment continues in market fluctuations, which gives the benefit of Rupee Cost Averaging.
Also read: SIP’s ABCD: New investors can also easily invest money, just keep these 6 things in mind
Disclaimer: Here information provided is being given only for information. It is necessary to mention here that the investment market in the market is subject to risks. Always consult experts before investing money as an investor. There is never advice to anyone to invest money on behalf of Moneycontrol.