If you think that to make big money in mutual funds or stock market it is necessary to invest thousands or lakhs of rupees every month, then you need to change your thinking. With proper planning and consistent investment over a long period of time, a large fund can be created even with a small amount. If you save just ₹ 999 every month i.e. about ₹ 33 daily and invest in SIP (Systematic Investment Plan), then you can create a fund worth lakhs of rupees in the coming years. The biggest reason for this is compounding, that is, the returns you get on your investment also start earning returns in the future. This is why even small savings can turn into big wealth over time.
If you do a SIP of ₹999 every month and get an average return of 12% or 15% per annum, your funds can grow rapidly in the long run.
Note: This calculation is based on estimated returns. Actual returns may be more or less as per the market performance.
Compounding means that you get returns not only on the original investment but also on the earlier returns. The longer the investment continues, the faster your money will grow. For example, your investment in 20 years will be only ₹2.40 lakh, but due to compounding your fund can grow manifold. Therefore, the sooner you start investing, the more benefit you will get.
If your income increases every year, then the SIP amount should also increase. This is called step-up SIP. Suppose you invest ₹ 999 per month in the first year and increase it by 10% every year. In such a situation, after 20 years your fund can be Rs 22 lakh or even more as compared to normal SIP. Therefore, increasing SIP as income increases is considered a good strategy.
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