SIP Calculator: Building long-term wealth doesn’t always require a massive initial investment. What it does demand is consistency, patience and the right financial instrument.
One of the most effective ways to achieve this is through a Systematic Investment Plan (SIP). Whether you are a beginner or a seasoned investor, understanding how SIP works and how long it can take to accumulate a corpus of Rs 1 crore can help you plan your financial goals wisely.
What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan, commonly known as SIP, is a disciplined method of investing in mutual funds. Under this plan, an investor contributes a fixed amount of money at regular intervals, usually monthly or quarterly, into a mutual fund scheme.
Instead of investing a lump sum all at once, SIP allows you to start small and grow gradually. Even with an amount as low as Rs 100 per month, investors can begin their journey toward wealth creation. The key lies in consistency and time in the market, rather than timing the market.
Through SIP, the investment amount is automatically deducted from your bank account and invested in the mutual fund of your choice. It functions much like a recurring deposit, but with the potential for higher returns over the long term. This method promotes financial discipline and eliminates the emotional stress of market fluctuations.
How Does a SIP Work?
A Systematic Investment Plan works on two crucial financial principles, Rupee Cost Averaging and the Power of Compounding.
Each time you invest through SIP, you buy a certain number of units of the mutual fund based on its Net Asset Value (NAV) for that day.
When the NAV is low, you get more units.
When the NAV is high, you get fewer units.
This process, called rupee cost averaging, ensures that you invest at different market levels, balancing out the highs and lows over time. This protects your investment from short-term market volatility and helps you accumulate wealth steadily.
Another major advantage of SIP is the power of compounding. Here, your returns begin to generate their own returns as time passes. The longer you stay invested, the more your money compounds, creating exponential growth in your wealth.
For instance, investing Rs 10,000 every month for many years allows your money not just to grow, but also to multiply itself through reinvested earnings.
SIP Calculation – How Long to Reach Rs 1 Crore Corpus?
Let’s take a practical example to understand how SIP can help you build a Rs 1 crore corpus.
- Monthly Investment: Rs 10000
- Expected Annual Return: 12 per cent
- Investment Duration: 21 years
According to ET NOW calculator, if you invest Rs 10000 every month for 21 years, your total invested amount will be Rs 2520000. Over this period, assuming an average annual return of 12 per cent, your investment would grow to around Rs 11386742.
That means your estimated returns would be approximately Rs 8866742, taking your total value to Rs 1.13 crore.
In simple terms, it can take around 21 years to generate a corpus of over Rs 1 crore with a consistent monthly SIP of Rs 10000, assuming a steady 12 per cent annual return.
Why SIP is the Smart Way to Invest
SIPs are popular among Indian investors for several reasons:
- Disciplined Investing: Fixed, automated deductions keep you consistent.
- Low Entry Barrier: You can start investing with as little as Rs 100.
- Market Volatility Shield: Rupee cost averaging balances market fluctuations.
- Wealth Creation Over Time: Compounding accelerates returns in the long run.
- Flexible and Convenient: You can increase, pause, or stop your SIP anytime.
A Systematic Investment Plan is one of the simplest and most reliable ways to build wealth. With just Rs 10000 invested every month, you can create a corpus of more than Rs 1 crore over time, provided you stay consistent and patient.
Remember, the earlier you start, the greater your wealth potential. SIPs aren’t just about investing; they’re about creating a habit that secures your financial future. Whether you are planning for retirement, a child’s education, or your dream home, SIPs offer a safe and steady path toward achieving your financial goals.