SIP Plan: How to Build a 5 Crore Rupee Fund by the Age of 50?

SIP Plan: A common mistake most of us make is not preparing for retirement. The reasons could be many: low salaries early in a career, workload, or lack of investment knowledge. Investment experts believe that the most important thing in investing is getting started, followed by patience. These two factors lead to success. Renowned investor Warren Buffett also says that only time and patience can truly create the magic of compounding and create true wealth.

Easiest Way to Compound

If you develop the habit of regularly investing small amounts, you can build a substantial retirement fund through mutual fund SIPs. For example, a step-up SIP can create a corpus of over ₹5 crore by the age of 50.

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When and How Much Should You Start Investing?

Suppose a person starts a job at the age of 22. After managing their expenses and lifestyle in the first 23 years, they begin an SIP at the age of 25. Initially, they invest ₹10,000 per month. They increase this SIP by 10% every year. This step-up further enhances the power of compounding over the long term.

Estimated Returns and Calculations

If you continue your SIP for 25 years (from age 25 to 50) and assume a 15% CAGR (average annual return), the results are as follows:

Total investment: approximately ₹1.18 crore

Estimated return: approximately ₹4.54 crore

Total corpus after 25 years: approximately ₹5.72 crore

This means that by starting with just ₹10,000, you can retire stress-free at age 50.

Compounding Effect of SIP

Compounding means that the returns you earn each year are added to your original investment, and interest is also earned on them the following year. This process transforms your small investments into a large corpus over the long term. Albert Einstein even called compounding the eighth wonder of the world. Another advantage of SIPs is rupee-cost averaging, which means that even if the market fluctuates, the average returns are good over the long term.

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Caution is required

We have estimated a 15% CAGR here, but keep in mind that past returns do not guarantee future returns. Markets are always volatile. Therefore, it is important to choose the right fund, maintain diversification and understand your risk profile before investing.