If you want to create a big fund by saving a little every month, then SIP i.e. Systematic Investment Plan can be a great option. By investing a monthly investment of just ₹10,000 continuously for 10 years, you can get returns of more than ₹11 lakh. This figure not only shows the power of regular investing but also explains the magic of compounding. Let us understand through simple calculations how this amount is prepared.
what is sip
SIP i.e. Systematic Investment Plan is a disciplined way of investing a fixed amount regularly in mutual funds. This is usually done on a monthly or quarterly basis and can start with an amount as small as ₹100. By investing regularly, SIP saves investors from guessing the market, promotes financial discipline and helps generate wealth in the long term by leveraging the power of compounding. SIP works on the principle of rupee cost averaging. In this, when prices are low, more units are purchased and when prices are high, fewer units are purchased, thereby reducing the average cost per unit over time.
Understand the calculation of return of ₹11,23,391
First of all, know that there is no limit on returns in mutual funds. It can be found either too much or less. However, it has been observed that on an average the annual return is 12 percent. In such a situation, based on this, we can understand the pattern of wealth generation through SIP. Now, if you invest Rs 10,000 every month in SIP continuously for 10 years, then according to the SIP calculator based on 12 percent return, you will get ₹ 11,23,391 as return on maturity. Let us tell you, in these 10 years you would have deposited a total of ₹ 12,00,000 in SIP. That means, in the end, you will get a total ready fund of Rs 23,23,391.
Benefits of investing in SIP
- SIP makes investing a regular habit. In this you do not need to wait for the right time of the market, rather you can continue investing at fixed intervals.
- Its biggest feature is that you can start investing with just ₹ 100 per month. This makes it an easy option for small and new investors.
- The interest earned on investment in SIP also increases with time, due to which even a small amount can become a big fund in the long run. The sooner you start, the more benefits you will get.
- In this you can increase or decrease the investment amount as per your convenience. If needed, you can pause it for some time or even stop it completely, without any penalty.
- Investing in SIP under ELSS (Equity Linked Savings Scheme) provides tax exemption under Section 80C of the Income Tax Act.