Mutual Fund SIP: You Can Become a Crorepati 3 Years Earlier with this SIP Strategy! Start with just Rs 7,500

Mutual Fund SIP: A Systematic Investment Plan (SIP) is one of the simplest and most effective ways to build wealth over time. It combines two powerful elements of investing — rupee-cost averaging and the power of compounding.

Rupee-cost averaging takes away the worry of timing the market by balancing your investments — you buy fewer units when the market is high and more when it’s low. On the other hand, compounding helps your money grow exponentially over the years.

Why SIPs help you stay disciplined

SIPs also help maintain financial discipline. Since the SIP amount is automatically debited every month from your bank account, your investment continues consistently without emotional decision-making.

Another benefit is flexibility — you can start with a small amount and increase it gradually as your income grows. This is called a step-up SIP, and it can make a big difference to your long-term wealth creation.

How step-up SIP boosts your corpus

Let’s take an example: you start investing Rs 1,000 per month in a SIP and you continue this for 20 years and earn an average return of 15% CAGR. Your total corpus after 20 years will be around Rs 13.27 lakh.

Now, if you increase your SIP amount by 10% every year (that is, Rs 1,000 in year one, Rs 1,100 in year two, and so on), your total corpus after 20 years can grow to Rs 25 lakh.

That’s almost double the amount, simply by stepping up your SIP by a modest 10% annually. It’s a realistic approach since most people’s income also grows by around that percentage every year.

Is it possible to earn Rs 1 crore in 20 years?

According to the Groww SIP calculator, you need to invest Rs 7,500 per month for 20 years at an expected annual return of 15% to reach a corpus of Rs 1 crore.

However, if you use a step-up SIP, it’s possible to reach this goal even faster.

• Normal SIP (fixed investment): By investing Rs 7,500 per month for 20 years at a 15% annual return, you can become the owner of Rs 1 crore.
• Step-up SIP (Increasing by 10% every year): If you increase your SIP amount by 10% every year, you can reach the same Rs 1 crore goal in less than 17 years.

Calculations show that by just stepping up your SIP yearly, you could become a crorepati three years earlier than a normal SIP would allow.

A word of caution for investors

While many mutual fund SIPs have delivered over 15% CAGR in the past two decades, past performance is not a guarantee of future returns. Market cycles, economic conditions and fund management strategies can impact future returns. So, investors should research funds carefully, invest based on their risk profile, and stay invested for the long term to make the most of compounding.

Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.