As a salaried professional, living from paycheque to paycheque, the dream may seem as simple as building castles in the air. With a Systematic Investment Plan (SIP), however, your dream can become a reality in due time. Here’s how.
How to make one crore through SIP investments?
If you are waiting to save a lump sum before starting investment, don’t. The journey of achieving one crore can begin with a small SIP amount of Rs. 5,000. Let us see how.
Start small, but start early
To grow your corpus through SIP investments, you need to have time in your favour for the compounding effect to work.
To give you some perspective, suppose you start investing at 22 in equity mutual funds with an annualised return of 15%. Here’s how the amount will vary depending on the change in your investment horizon.
|Investment Horizon||Required SIP amount|
|10 years||Rs. 36,335|
|20 years||Rs. 6,679|
|30 years||Rs. 1, 444|
So you see, the longer you invest, the less you need to shell out every month to reach your goal. Once you’ve settled on that, here are the next steps.
- To start off, do the math. Figure out the most effective combination of investment amount and horizon based on your current budget.
The 15*15*15 rule is a standard method. You have to invest Rs. 15,000 every month for 15 years in a fund offering returns at a rate of 15%.
- Cherry-pick your basket of funds. Historically, equity and equity-oriented schemes have given the best returns, especially funds offering a return of 12% or more.
At the same time, focus on diversifying fund allocation instead of sticking to theme-based or sector-based investing.
However, if you continue to invest the same SIP amount for the next 15 or 20 years, you won’t reach you target corpus. This is where you need to step your investment strategy, quite literally!
Additional Read: Common Myths about SIP Investment in India
Increase the SIP amount
While you can keep going the long distance with a small SIP amount, increasing the investment can help you achieve one crore faster.
This is why your investment should grow as your income level does. So, try to step up your SIP amount by 10% or 20%, depending on what you can spare. For example, if you had been investing Rs. 5000 monthly and got a hike of 10% in your salary; you can put half of it towards your SIP. So if you were earning Rs. 30,000, your new SIP amount will be Rs. 6,500 and so on.
Review SIP investments periodically
Finally, even if you are regular with your SIP investments, remember you cannot meet your target if you are not getting high returns. The invest and forget mindset doesn’t work here, even though you have professionals managing your corpus.
Thus, you need to review your fund performance regularly and pull out from schemes not yielding the expected profits.
Additional Read: How SIP Investment Can Help Small Business Owners
As you can see, wealth creation takes time. So, invest systematically, review your portfolio periodically, and stay patient. And you will become a Crorepati as planned.
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