Mutual fund sip
Most of us make a common mistake. Do not prepare for retirement. The reasons can be many. Lack of low salary, workload or investment information at the beginning of career. Investment gurus believe that the most important in investment is to start and then be patient. Success is the result of both these things. Famous investor Warren Buffet also says that the magic of compounding works with time and patience and becomes real property.
The easiest way to compound
If you make a habit of investing small money regularly, then you can make a big retirement fund through mutual fund SIP. For example, a corpus of more than Rs 5 crore can be prepared from step-up SIP to the age of 50 years.
When and how much to invest?
Suppose a person starts a job at the age of 22. In the first 23 years, he starts SIP at the age of 25 after assuming spending and lifestyle. Initially he performs SIP of Rs 10,000 per month. Every year increases this SIP by 10%. This step-up increases the strength of compounding during the long period.
Estimated returns and calculations
If SIP is continued from 25 years (from the age of 25 to 50 years) and 15% CAGR (average annual return), then the results come out.
- Total investment: around ₹ 1.18 crore
- Estimated return: around ₹ 4.54 crore
- Total corpus after 25 years: around ₹ 5.72 crore
That is, by starting from just Rs 10,000, you can retire at the age of 50 and retire.
SIP compounding effect
Compounding means. The returns you get, they get added to your real investment every year and next year they also get interest on them. This process converts your small investment into large corpus in the long term. Albert Einstein also called compounding the eighth wonder of the world. Another feature of SIP is the rupee cost average, that is, even if the market is up and down, the average returns are good in the long run.
Caution is necessary
Here we have estimated 15% CAGR, but keep in mind that the previous returns do not guarantee the future. There are always ups and downs in the market. Therefore, it is important to choose the right fund before investing, keep diversification and understand your risk profile.