Financial advisors always recommend starting the habit of investing and saving as early as possible. If you understand the importance of investing and saving at the beginning of your career, your life can be completely stress-free after retirement. By starting to invest at a young age, your investment gets compounded, and you have more time for growth.

Compounding is a powerful tool that can significantly increase your wealth. If you want to make the most of this, consider investing in mutual fund SIPs. Throughout this article, we’ll show you, with the help of calculations, how you can build a retirement corpus of Rs 1 crore by starting a SIP of Rs 1,000 at the age of 25.

SIP: The Magic of Small Savings

SIP, or Systematic Investment Plan, is an option in mutual funds that allows you to invest small amounts every month. In an SIP, you choose a fixed amount and a date for investment. On that date, the chosen amount is deducted from your account and invested in mutual funds. Apart from tax-saving schemes like ELSS, there is no fixed period for SIP, and you can invest as long as you want.

The longer your investment through SIP continues, the greater the benefit of compounding. Usually, people opt for a monthly SIP, but you can also choose weekly, quarterly, half-yearly, or yearly investments. You can decide the SIP amount based on your income and wealth creation goals.

Boost Your SIP with a Step-Up or Top-Up

Increasing your SIP amount by a certain percentage every year is called step-up or top-up SIP. By doing this, you can reach a larger financial target compared to a regular SIP. For example:

If you start with a monthly SIP of Rs 5,000 and increase it by 10% each year, the following happens:

  • For the first 12 months, you invest Rs 5,000 per month.
  • From the 13th month onward, you invest Rs 5,500 per month.
  • From the 25th month, the SIP amount will increase to Rs 6,050, and so on.
  • In this way, your SIP amount will keep increasing year after year.

Become a Millionaire with a SIP of Rs 1,000

Let’s say you start your career at the age of 25 with a monthly salary of Rs 25,000. Investing just 4% of your income, or Rs 1,000, in a mutual fund SIP is a manageable goal. As your income increases, you can raise your SIP by just 5% each year. If you do this consistently until you are 60 (a 35-year investment period), and assuming an annual return of 12%, you will accumulate approximately Rs 1 crore by the age of 60.

In this example, your total investment over 35 years would be Rs 10,83,844. With a 12% annual compounding return, the value of your investment at the age of 60 would be around Rs 1 crore.

The Power of a 10% Top-Up Each Year

If you increase your SIP by 10% every year instead of 5%, your total investment over 35 years will amount to Rs 32,52,292. Assuming a 12% return on your investment, by the time you reach 60, your corpus will grow to approximately Rs 1.77 crore.

Disclaimer: This content, including advice, provides general information only. Times Bull is not responsible for any financial investments made, as it is entirely your responsibility. Please consult a financial advisor for better results.