SIP is a scheme that is included in the portfolio of most people today. This scheme of mutual fund has the ability to create a big fund from small savings.
In the long term, funds worth crores can be added through it. But there is a secret related to SIP, which even big experts do not know or may be they have not noticed it. That is the rule of 5. Here 5 means 5 years. If you notice, you will see that every 5 years your SIP runs at rocket speed. Its amount almost doubles. If the return is very good then it can triple or quadruple. Meaning every 5 years can prove to be a ‘game changer’ in the returns of your SIP. Here is the calculation of 5, 10, 15, 20 and 25 years on a monthly SIP of Rs 5,000 at a return of 12%.
If you run a monthly SIP of Rs 5,000 for 5 years, you will invest Rs 3,00,000. At a 12% average return, you will get Rs 1,05,518 as interest and you will accumulate a total of Rs 4,05,518.
If you run a monthly SIP of Rs 5,000 for 10 years instead of 5 years, you will invest Rs 6,00,000. At a 12% return, you will get Rs 5,20,179 as interest and you will accumulate a total of Rs 11,20,179. Compared to Rs 4,05,518, Rs 11,20,179 is more than double.
If you extend the monthly SIP of Rs 5,000 for another 5 years and continue it for 15 years, you will invest Rs 9,00,000. At a return of 12%, you will get Rs 14,79,657 as interest and you will end up with a total of Rs 23,79,657. Rs 23,79,657 is almost double the amount of Rs 11,20,179.
If you extend the monthly SIP of Rs 5,000 for another 5 years and continue it for 20 years, you will invest Rs 12,00,000. At the rate of 12% return, you will get Rs 33,99,287 as interest and you will accumulate a total of Rs 45,99,287, i.e., about 46 lakhs. Compared to Rs 23,79,657, 46 lakhs is also almost double.
If you run SIP for 25 years, your total investment in 25 years will be Rs 15,00,000. At the rate of 12%, you will get an interest of Rs 70,11,033. In this way, you will have a total of Rs 85,11,033 in 25 years. Compared to Rs 45,99,287, 85,11,033 lakhs is not completely double, but it is very close to double. In this way, your SIP is reaching almost double every 5 years.
SIP is considered a market linked scheme, its returns are also based on the market. In such a situation, returns are not guaranteed. There is fluctuation in it. Here the calculation has been done on the basis of an average return of 12 percent. If the return is less or more, then the calculation may also change.