What’s the dream amount you want to accumulate from your mutual fund investment? While different people might have different answers for this, Rs.1 crore is a desirable corpus. But many investors shy away from trying to aim so big, thinking it will be hard to achieve. But 15x15x15 rule has shown us that if you are willing to put Rs.15,000 every month in a fund that gives you 15% annual returns, you can accumulate Rs.1 crore in 15 years. But many investors might not be able to afford to put aside Rs.15,000 every month for this. If you are one among them, fret not; read on to find out how to become a crorepati by savings just Rs.1000 every month.
Systematic investment plans
To understand how to reach your goal, you must understand the tools you would be using. One essential tool here is SIP.
You can invest in a mutual fund in two ways; you can either invest a lump sum amount and get returns from the principal or invest a small amount of money monthly to create a corpus in the long term.
Since the goal amount is enormous, monthly investment is more affordable. Such monthly investments in a mutual fund are called systematic investment plans or SIPs. When you register in an SIP, your monthly contribution will be automatically debited from your account without fail. This can help you employ a more disciplined investment approach, which could come in handy when you invest for a more extended period of time.
The power of compounding
Compounding is another factor that could help you with your goal in long term investment plans. In the investment space, compounding is the scenario in which your returns are reinvested to the fund, and your returns also start to gain profit. Let us take the help of an example to understand this further.
Let us suppose you invested Rs.10,000 in a mutual fund. For ease of calculation, let us imagine that the fund’s NAV grew 2% per day for the first two days.
Here, at the end of day one, your profit would be Rs.200. This amount will now be added back to the principal, making the total investment at the start of day 2 Rs.10,200.
For day two, your profit would be Rs.204, even when the profit was the same 2%. Growth like this can significantly aid your corpus building in the long term.
Reaching Rs.1 crore
Thanks to compounding, you can reach your dream goal of Rs.1 crore by investing Rs.1000 every month if you are willing to stay invested for the longer term. Investment experts believe that you will be able to reach your goal in about 34 years if your investment continues to give you returns over 15%. If you are taking up this goal, make sure you constantly monitor and assess your investments to stay on the right track. On the other hand, if you are willing to increase your monthly instalment every year according to the increase in your income, you will reach your goal much faster.
Calculating your returns from investing in the longer term can get confusing; hence it is advisable to take the help of an SIP calculator. It simplifies your investment planning by showing the monthly SIP needed for you to reach your goal.
No amount of corpus is out of reach if you have the right investment vehicle and the luxury of time. Talk to your investment advisor to find a fund that suits your goals and target.