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Making a significant amount of corpus is everyone’s dream. Such a corpus can help you attain financial freedom and even take early retirement. But only a small number of people end up trying to make a corpus, as many think that accumulating a corpus that ranks in crores may be unattainable. But, the truth is, a disciplined investing approach through tools such as a systematic investment plan makes it much easier than you think. Let us learn more about SIPs and see how you can make use of tools like the SIP calculator to accumulate a hefty corpus.
What is a SIP?
There are two ways you can invest in a mutual fund.
- The first way is to invest in a corpus that you already have. This is usually done when you have a corpus ready that needs to be protected or appreciated. Of course, the biggest prerequisite here is that you need to have a solid corpus.
But often, investors, especially beginners, need not have the luxury of this. In some cases, investors might even be trying to make such a corpus. In such cases, the second option can come to your rescue.
- The second option is to invest through SIPs. SIPs give you an option to invest smaller amounts of money each month to create a considerable corpus with time.
What helps SIPs is the power of compounding. Compounding is when the returns from the fund that have been invested in are reinvested back into the corpus so that the compounded corpus starts earning profits thereafter.
15x15x15 rule
We have discussed how SIP investments can help create a larger corpus. But how big can the corpus be? Can it help you make a crore? Let us find out.
The 15x15x15 rule is a famous investment rule that has helped many make a crore. The rule says that if you invest Rs.15,000 per month in a fund that gives 15% returns for 15 years, you will end up with a corpus of Rs.1 crore. This is backed up by maths.
But when you plan to invest in creating a corpus that could even be larger, how can you figure out the math then? SIP calculators are the tool you can use here.
SIP calculator
There are four key elements to a SIP investment – The corpus amount that you want to create, the amount of time you have to create that corpus, the amount of money that you can invest in a month, and the stipulated returns of the fund you have chosen.
Using these four elements, the SIP calculator can help you understand your SIP plan better.
For instance, if the desired corpus you have in mind is Rs.5 crore, you have shortlisted a fund that gives returns of 15%, and you give yourself a tenure of 15 years to make money, you can use the SIP calculator to find the ideal monthly instalment amount. Let us see how.
Desired tenure amount – Rs.15 crore
Returns – 15%
Tenure – 15 years
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When you use a SIP calculator, it will tell you that you will need to invest Rs.74,000 every month to reach the desired corpus.
Similarly, in a situation where you have a monthly instalment amount that you can afford, a fund that you have chosen, and the desired corpus amount, you can use the SIP calculator to find the time it may take for you to reach the desired corpus.
The article shows how it is possible to make the corpus of your dreams through a disciplined investment approach. Make sure you talk to an investment expert and choose the right fund to get the desired results.
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