Investing in mutual funds has become increasingly popular in recent years due to the numerous benefits it offers. One such benefit is the option to invest via Systematic Investment Plan (SIP), which allows investors to invest a fixed amount at regular intervals, making investing in mutual funds easier. One of the common financial goals for many individuals is to accumulate 1 Crore (10 million) through investments.
In this article, we will explore how much time and money it will take to reach this financial goal through SIP in mutual funds.
Calculating Time & Money Required for 1 Cr:
To calculate the amount of time and money required to reach 1 Cr through mutual fund SIP, you need to consider the following factors:
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- Investment Amount: The amount of money you invest each month through SIP.
- Investment Tenure: The number of years you plan to invest in the mutual fund.
- Rate of Return: The average annual rate of return you expect to receive from your investment.
Based on these factors, you can use an online SIP calculator to estimate the total amount you would have accumulated at the end of your investment tenure. You can also use a financial advisor to help you with the calculation.
For example, if you invest 10,000 each month for 30 years and expect a rate of return of 12% per annum, you would have accumulated approximately 1 Cr. However, it’s important to note that the rate of return is not guaranteed and may fluctuate over time.
It’s also important to understand that the actual time and money required to reach 1 Cr may be more or less than your estimate, depending on the performance of the market and the mutual fund. It’s always advisable to review your investment portfolio regularly and make necessary adjustments to ensure that you are on track to meet your financial goals.
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How to reach a goal of Rs. 1 Crore through SIP investment in mutual funds:
- Invest Consistently: Make SIP contributions regularly and increase the amount over time.
- Choose a diversified equity fund: Historically, equity has delivered higher returns compared to other asset classes.
- Increase SIP amount periodically: As income increases, consider increasing the SIP amount to reach the goal faster.
- Stay invested for the long-term: Avoid trying to time the market and instead stay invested for the long-term to benefit from compounding.
- Consider inflation: Inflate the goal amount and SIP amount to account for inflation.
- Rebalance Portfolio: Review and rebalance the portfolio regularly to ensure it aligns with your investment goals
- Seek professional advice if necessary.
Realistic Examples of SIP Investments towards 1 Cr Goal
While the theoretical calculations and projections are useful in understanding the concept of Mutual Fund SIP and the amount of time and money required to reach the 1 Cr target, it’s important to also consider real-life scenarios.
Here, I present investments made through SIP that have yet to reach the target of 1 Cr, but are in progress. What is the current valuation of these portfolios as of today?
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In this examples, the first investor adopts a straightforward strategy of consistently investing without employing market timing or asset allocation techniques. Their focus is primarily on large cap funds.
Example 1: An individual invested in a large-cap mutual fund through SIP with a monthly contribution of 9,000 and also added new sip from time to time. As of today, the portfolio worth is 52.6 lakhs, with 43000 sip running. Although the 1 Cr aim has not yet been met, the individual has observed constant growth in their investment over the years. The present growth rate will meet the aim in the next four years.
| SIP Desc | Started | SIP Amount |
|---|---|---|
| First SIP started | Aug 2011 | 9,000 |
| Adding a new SIP with an option to increase by 500 every 6 months, resulting in a total SIP amount of 10000. | Nov 14 | 10,000 |
| Add new 2 SIPs | May 15 | 9,000 |
| Add new SIPs | Nov 21 | 15,000 |
| As on Date Jan 2023 – Running SIPs | 43,000 |
I will include scheme-wise details and only display the allocation of funds into categories in SIP, investment, and portfolio valuation.
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| Fund Category | SIP running | Invested | Valuation | Profit |
|---|---|---|---|---|
| Large Cap Fund | 20,000 | 14,60,970 | 23,45,388 | 8,84,418 |
| Value Fund | 16,000 | 10,52,977 | 21,80,315 | 11,27,338 |
| Flexi Cap Fund | 7,000 | 3,41,991 | 7,34,319 | 3,92,328 |
| Total | 43,000 | 28,55,938 | 52,60,022 | 24,04,084 |
This portfolio has generated a 13.31% CAGR return despite a heavy market decline. The investor, who is currently 41 years old, will reach their 1 Cr target in 4 years if the same 13.31% returns are sustained.
This examples illustrate that investing through SIP in mutual funds can lead to a substantial growth of one’s investment portfolio over time.
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It is important to understand that investing in mutual funds is a long-term strategy and the goal of 1 Cr or any other financial target may not be achieved overnight.
But, with consistency and patience, the objective can be achieved in due course of time.
Bottom Line:
In conclusion, SIP in mutual funds can be a powerful tool for building wealth over time. By consistently investing a small amount of money each month, an individual can achieve their financial goals such as 1 Cr.
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To calculate the time and money required to reach a goal of 1 crore through SIP in mutual funds, consider the following factors: Investment amount, investment tenure, and expected rate of return.
The actual time and money required may vary based on market performance. To reach the goal, invest consistently, choose a diversified equity fund, increase SIP amount over time, stay invested for the long-term, account for inflation, and seek professional advice if necessary.
