Sip investment tips: Protecting your financial future should be one of the greatest priorities of life. Because this reduces stress to a great extent when it increases aging. The most important is to save. The sooner you start savings, the more easily and the bigger you can make.
However, if you have not only invested it somewhere by saving money, inflation will gradually reduce the price of your capital. That is why investment is necessary. And the investment should be such that the return from it can at least beat inflation.
Now the question arises that how can a fund of Rs 1 crore be prepared from only monthly savings in 10, 15 or 20 years to beat inflation?
Mutual funds most effective
Financial Advisors believe that mutual funds (MFS) is a great way to make property by defeating inflation. You can invest every month or lump sum in mutual funds. When you invest every month, it is called SIP (Systematic Investment Plan).
What is step-up SIP?
Step-up SIP means that you increase your monthly investment every year by a fixed percentage (eg 10% or 15%). This keeps your investment habits in synergy with your income and also reduces the initial burden. Finally, there is also a scope to make a big fund.
How to prepare a fund of Rs 1 crore?
- Target amount: ₹ 1 crore
- Estimated Return (CAGR): 12% annual
- Investment method: Sip (monthly investment)
- Step-up rate: 10% increase in SIP every year
- Investment period: 10 years, 15 years, 20 years
Note: Equity mutual funds and index funds in India have historically given an annual return of 10–14%. We have done calculations here considering 12% as a realistic and safe average.
How much monthly savings have to be done?
| Investment period | Step-up sip | 10% step-up sip |
| 10 years | ₹ 43,000 | ₹ 27,000 |
| 15 years | ₹ 20,000 | ₹ 10,500 |
| 20 years | ₹ 11,000 | ₹ 4,800 |
Step-up SIP has accepted an increase of 10% in investment amount every year. Due to this, investment will start with a low amount, which will increase every year.
Sip in which mutual funds?
You can invest in mutual funds for SIP according to your choice and convenience. Can look at some mutual funds:
- Flexi Cap Funds: Parag parikh, jm financial flexi cap etc.
- Mid-cap funds: Motilal Midcap, HDFC Mid Cap Opportunities etc.
- Small-cap funds: Nippon India, Axis, Bandhan Small Cap etc.
How will the option of index funds be?
Index funds are known for giving stable returns at low cost. They often give an average return of 12–14%. For investment in this, you can invest in index like NIFTY 50 and Sensex Top 30. This means that if you invest in NIFTY 50 index funds, your money will be invested in 50 companies that are included in NIFTY. Such as Reliance, TCS, Infosys, HDFC Bank etc.
Its aim is to give this index fund NIFTY 50 as much as. At the same time, mid-cap and small-cap funds can return up to 18%. However, they also have high risk.
Which fund to choose?
| Time limit | Suggested fund | Risk level | Return Possibility (CAGR) |
| 10 years | Flexi / Mid Cap Funds | Medium to high | 12–14% |
| 15+ years | Mid / small cap funds | High | 13–15% |
| 20 years | Multi cap / index funds | medium | 11–13% |
Note: If you do not want to manage funds actively, then index funds or ETF are better for you. They are cheap and easy.
Precautions related to investment in mutual funds
All mutual funds are subject to market risks. If there is any major movement in the market, then it will have a direct impact on their returns. Also, every fund contains an expenses ratio, which may reduce your returns a bit. The same scheme can show different expenses on different platforms. In this case, always choose a low -cost option.
Some funds also have Exit Load, that is, there will be a charge on early withdrawing. This means that if you leave 90 days or before the period fixed by the fund, you have to give exit load.
What will be the real price of 1 crore?
You will raise funds of ₹ 1 crore through investment through SIP, but then its value will not be as much as ₹ 1 crore today. The most important reason for this is inflation, which will reduce our money value. Let us know that if the inflation rate is 6%, then the value of ₹ 1 will be in the coming time.
| Time | Today’s value of ₹ 1 crore |
| 20 years later | ₹ 31.18 Lakh |
| 30 years later | ₹ 17.41 Lakh |
| 50 years later | ₹ 5.43 Lakh |
This means that the value of money will decrease over time. Therefore, keep inflation in mind while making your financial goals. Especially, if you are investing for long term.
Also read: How much will be the value of ₹ 1 crore after 50 years, what is the way to avoid inflation?
Disclaimer: Here information provided is being given only for information. It is necessary to mention here that the investment market in the market is subject to risks. Always consult experts before investing money as an investor. There is never advice to anyone to invest money on behalf of Moneycontrol.
