The age of 25 is that turning point when earning starts, but future planning often gets postponed. If you show a little wisdom every month at this age, then by the age of 40, money tension can go away from your life forever. If you are 25 years old and dreaming of becoming a millionaire by the age of 40, then this dream is not impossible at all. Today we will explain to you in simple language through SIP (Systematic Investment Plan) how much amount needs to be started and how a fund of Rs 1 crore can be created in 15 years.
Why is SIP the best way?
In SIP, a fixed amount is invested in mutual funds every month. Its biggest advantage is that the magic of compounding works in it. The sooner you start investing, the more benefit you will get. 25 years of age is considered to be the best age to start investing.
Mathematics of starting SIP in 25 years
Suppose, a person starts a SIP of Rs 22,000 every month at the age of 25. If he gets an average annual return of 12% and continues this for 15 years, then the figures will be something like this-
- Total investment amount: Rs 39,60,000
- Estimated Return: Rs 65,10,491
- Total Fund Value: Rs 1,04,70,491
That means by investing just Rs 39.6 lakh, you can create a fund of more than Rs 1 crore by the age of 40.
Understand the power of compounding here
In this entire investment, the most important role is not of returns but of time. The fund grows slowly in the initial years, but as time progresses, returns on returns also increase. This is the reason why the fund seems to grow rapidly after the 10th year.
Is Rs 22,000 SIP necessary for everyone?
Not necessary. If you start SIP less than this, then either you will have to increase the time or increase the SIP amount gradually. Many investors can reach the same goal by adopting a SIP step-up of 10% every year.
Things to keep in mind before investing
- Always do SIP for long term
- Do not stop SIP due to market fluctuations
- Consult a financial expert if needed
Disclaimer:This news is for information only. Be sure to consult your financial advisor before investing.
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