Mutual fund SIPs have fulfilled the dreams of many investors and will continue to do so. According to AMFI data, SIPs have provided substantial returns over the long term for many years. To reap the full benefits of SIPs, it is crucial to remain invested for an extended period.
Many companies in India have introduced attractive offers to promote this new savings option. However, if you do not understand the inner workings of SIPs, you may regret your investment decisions later. In this article, we will discuss a formula that can be immensely useful for making the most of your investment.
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Don’t Regret Starting SIP Late
If you haven’t started an SIP yet, there’s no need to regret it. As the saying goes, “When you wake up, it will be morning.” In other words, it’s never too late to start. Even if you’re around 40 years old, you can still begin an SIP now and accumulate a significant fund by the time you retire.
The 40x20x50 Formula: How to Build a ₹5 Crore Fund
With the 40x20x50 formula for SIPs, you can start investing at the age of 40 and prepare a ₹5 crore fund by the time you retire at 60. Here’s how it works:
- 40: The age at which you start your SIP.
- 20: The number of years you invest.
- 50: The amount you invest each month, ₹50,000.
- By following this formula, you can accumulate ₹5 crore by the time you turn 60.
How ₹5 Crore Will Grow in 20 Years
Assuming an average annual return of 12%, your ₹50,000 monthly SIP will grow into ₹5 crore over 20 years. If you achieve a higher return of 14%, your corpus could grow to ₹6.5 crore by the time you retire.