By allocating funds into different financial avenues, you are investing. Investments are carried out with one goal. It is to earn more income than what they get from the full-time investment. Investments are made to acquire wealth over time rather than creating them instantly. Investing in different assets available in the market comes with more than one option for fund allocation. The said options are named thusly. Systematic investment plan (SIP) and lumpsum investment. In lumpsum investments, you are required to make a one-time payment regardless of how large the amount is. Conversely, in a SIP, your funds are invested in the asset class at regular intervals. All you need to do for a smooth transaction through SIP is to leave a standing instruction with your bank for a monthly deduction of a certain sum along with a specified date.
However, before investing, you need to make sure that the fund allocation that you are going to make aligns with things like income, investment profile, risk profile, expenditures, and financial goals. Once your affordability has been ascertained, you can choose to invest through a SIP or opt for a lumpsum payment. It is possible to use these methods for almost all kinds of investments including mutual funds.
What is a mutual fund?
In simple words, these funds are investment tools. In this investment tool, money from a group of investors is pooled into a singular fund. Once enough money is collected, the said fund is used for investing in different kinds of financial securities like gold, money market instruments, and stocks. Once a unit is bought in a mutual fund, the investor owns a small stake in all the investments which are considered to be a part of the fund. One of the most commonly used investment tools, they are known for alluring investors in the form of numerous benefits.
Is it possible to earn ₹1 crore in five years by investing in SIPs?
Yes, it is possible to earn the ₹1,0000000 if that is your financial goal. However, only knowing your goal isn’t enough. You must also know how much you need to invest every month. If you don’t know how much you exactly need to invest every month, don’t worry, thanks to the internet, you can use something which is referred to as a SIP calculator. All you need to do is click on the option that will tell you your monthly investments. Listed below is the process involved:
- Set your goal:
The first thing that you need to add to the SIP calculator page is the amount that you have set as your goal. In this case, the amount you need to add will be ₹1,0000000. After adding the amount, you need to proceed to the next step. Which is:
- Set the duration:
After adding your goal, please proceed to set the duration you would like to keep investing. In this case, the duration you need to add is 5 years. After adding that, proceed to modify the rate of return that you are expecting.
- Set the rate of return you expect for your investments:
This is the final step in this process. Here, all you need to do is add the rate of return you expect for investing for five years. Here, you can add a number of your choice. So, let’s say 12%
The final answer after adding the numbers will be ₹1,22,444. So, to accumulate a large sum of ₹1 crores, your monthly SIP investments for five years need to be approximately ₹1.2 lakhs.