Mutual Fund SIP: Mutual fund SIP is considered an effective way to build a large corpus over the long term. The longer the SIP is run, the bigger the corpus it will help you build. Actually, there is tremendous benefit of compounding in SIP. This is the reason why continuing investment in it for a long time gives more benefits. Here we will learn how to build a corpus of Rs 5 crore with a SIP of Rs 5000, how much time will it take and how will the step-up formula work to achieve this goal?
How much time will it take to generate a fund of Rs 5 crore from a SIP of Rs 5000?
To create a corpus of Rs 5 crore from a SIP of Rs 5000, you will have to use the step-up formula. You have to start SIP with Rs 5000 and then step-up the SIP amount by 6 percent every year. With this strategy, if you get an average expected return of 15 percent every year, then in 30 years you can have a corpus of Rs 5.28 crore. Similarly, if you get an average expected return of 12 percent every year, then in 35 years you can create a huge corpus of Rs 5.52 crore.
Keep these things in mind before investing in SIP
Before starting to invest in mutual fund SIP, you should take special care of some very important things. You never get the same returns in SIP. How much return you will get from SIP completely depends on the performance of the stock market. If the market remains bullish then you will get better returns. Similarly, if the market continues to decline, you may also have to suffer losses. But, in the long term the risk of loss is significantly reduced. You also have to pay capital gains tax on the returns you get from SIP.
Disclaimer: This article has been written for information purposes only. Always consult your financial advisor before making any kind of investment or taking any financial risk. India TV will not be liable for any kind of risk.
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