Mutual Fund SIP: The number of demat accounts in the country is increasing rapidly as common investors of the country are now turning to mutual fund SIP for investment. Investments in mutual fund SIP are continuously increasing. There is a lot of risk in mutual fund SIP but seeing the better return history, common investors are now investing money in SIP instead of depositing money in banks. Today we will learn here how a fund of Rs 5 crore can be created with a SIP of Rs 5000 and how much time will it take.
The longer the investment, the bigger the returns
How can a SIP of Rs 5000 create a corpus of Rs 5 crore? Before knowing the answer to this question, it is important for you to know that you will get the full benefit of SIP only if you continue investing in it for as long as possible. The real benefit of SIP is available only in the long term. The longer you invest in it today, the higher will be the returns you get.
How will a fund of Rs 5 crore be prepared in 30 years?
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.
If you get 12% return, how many years will it take to make Rs 5 crore?
Suppose, if you get an average expected return of 12 percent every year with this investment strategy, then in 35 years you can create a huge corpus of Rs 5.52 crore. Let us tell you that the returns received from SIP come under capital gains, hence you will have to pay capital gains tax on your returns.
