New Delhi: Mutual fund SIP (Systematic Investment Plan) investments have emerged as the most popular instruments for a large section of middle and lower-middle class people. In March alone as many as 52.82 lakh new mutual fund SIP accounts were registered, driving the total number of such accounts to 9.72 crore. The inflow to MF SIP stood at Rs 32,087 crore, according to AMFI data. SIP in mutual funds is emerging as the most preferred instrument of wealth creation among the middle class in India.
Despite the popularity of mutual fund SIP, it must be said that creating the corpus of Rs 1 crore is the hardest. Once this hurdle is achieved, the next Rs 1 crore comes relatively easily and in less time and the third one crore comes in even less time. It all depends on the time that the portfolio gets to unleash the force of compounding. Anyone conversant with basic mathematics will tell you that the force of compounding acts the best over time and that is why investment strategists advise people to have patience to build wealth.
How long to create Rs 1 crore corpus?
Obviously it depends on what you invest monthly and the returns your funds generate. Assuming you invest Rs 10,000 a month, it will take you 20 years to create a corpus of Rs 1 crore. But if you can double the amount to Rs 20,000 a month, it will take you 15 years. If you invest Rs 25,000 a month, the time to reach Rs 1 crore will be 14 years. All these calculations assume a return of 12% annually in the schemes that you select.
The next crore and the next come much quicker
But the next Rs 1 crore and the next comes in shorter and shorter time. For example, if you keep investing Rs 25,000 a month, the next Rs 1 crore will come in the 19th year. The third Rs one crore will be created in the 23rd year. The use of a SIP calculator which is available online will demonstrate this. It all happens due to the force of compounding becoming bigger and bigger with time. The more you allow time to work on ypur portfoilio, the wuicker the returns will come.
