Mr X gifted a piggy
bank to his child and told he would give Re 1 every day. Child was happy to
receive the piggy bag and had the desire to buy a board game, so every day as
soon as he gets the money from his father he deposited in the piggy bag. As
days passed, child accumulated enough money and bought the desired board game.
SIP one of the most
decorated term in Mutual fund industry is equivalent to a child’s piggy bank. Piggy
bank develops disciplined saving habit in your child while SIP promotes
disciplined Investment for creating wealth.
A monthly investment
of Rs 10,000 over 20 Years at 10% return can accumulate a wealth of 75.93 lacs.
The table below shows wealth creation for a monthly investment of Rs 10,000
over different time period/return combinations.
Monthly SIP
of Rs 10,000
|
Potential
Investment Return (%)
|
|||||
6%
|
8%
|
10%
|
12%
|
15%
|
||
Period (Years)
|
3
|
3,93,361
|
4,05,356
|
4,17,818
|
4,30,769
|
4,51,155
|
5
|
6,97,700
|
7,34,769
|
7,74,371
|
8,16,697
|
8,85,745
|
|
7
|
10,40,739
|
11,21,133
|
12,09,504
|
13,06,723
|
14,71,290
|
|
10
|
16,38,793
|
18,29,460
|
20,48,450
|
23,00,387
|
27,52,171
|
|
20
|
46,20,409
|
58,90,204
|
75,93,688
|
98,92,554
|
1,49,72,395
|
|
For Ex: Assume at the age of 25 Years, Mr X starts a monthly
SIP of Rs 10,000 ; Over five years the value of investments would be close to
Rs 7.74 lac (say Mr X at 30 years can use the money for equity component of
home purchase), Over 20 Years the value of investment would be close to 75.9
Lacs (can be used for purchasing house, kids education, retirement planning)
Conclusion: SIP promotes
disciplined investment and a great way to create wealth over long run; An small
and disciplined investment over long time can create significant wealth and
take care of your dreams. Start small and start early for a great financial
future.
