In today’s era, every common man dreams of having a big fund for the future, so that he does not have to worry about money for retirement, children’s education or any emergency. But most people stay away from investing thinking that a lot of money is required to become a millionaire. Financial advisors say that this is not at all the case. With proper planning and discipline, even small amounts of money can make you a millionaire. The best example of this is the 20×12×20 SIP rule.
What is 20×12×20 SIP rule?
This rule is very easy to understand.
- 20 means investment of Rs 20,000 every month
- 12% means an average return of 12 percent annually
- 20 years means investment period
That is, if you do a SIP of Rs 20,000 every month and you get an average return of 12% in the long run, then after 20 years you can have a huge corpus ready.
How much investment and how much fund will be created?
If you do SIP of Rs 20,000 every month, your total investment in 20 years will be Rs 48 lakh. Now this is where the magic of compounding works. At 12% annual return, your fund can reach around Rs 1.9 crore to Rs 2 crore after 20 years. That means you may have invested Rs 48 lakh, but with the power of time and compounding the money can become more than four times.
Financial Advisor What do you say?
According to financial advisors, the biggest strength of SIP is discipline and time. The market sometimes goes up, sometimes it comes down, but over the long term, equity mutual funds have given an average return of around 12%. By doing SIP the effect of market fluctuations also reduces.
What things should be kept in mind?
- Continue SIP for a long time
- Don’t panic and stop SIP if the market falls.
- Try to increase SIP amount as annual income increases
- Choose the right mutual fund
Why is this rule special?
20×12×20 SIP Rule is special because it is designed for common working and middle class people. There is neither much risk in this nor a huge amount of money is required. Just proper planning and patience is required.
Disclaimer:This news is for information only. Be sure to consult your financial advisor before investing.
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