Individuals are often apprehensive about their future financial condition. This also includes their retirement. A retirement is the golden era of an individual as this is the time when they can pursue what they desire for. This is the phase when they can take up their hobbies and do activities that required time during their working era. So, it wouldn’t be an exaggeration to say that almost all individuals look forward to their retirement. What if we tell you that you can easily look forward to your retirement, in fact you can achieve that early with the help of an SIP return calculator. Let’s understand how you can achieve retirement by the age of 45 with SIP investments.
What is SIP?
Systematic Investment Plan (SIP) is one of the ways to invest in mutual funds. SIP investments allow investors to regularly invest in their desired mutual fund schemes at periodic intervals for a predetermined period of time. On the set date of each interval, a predetermined sum of money is debited from the investor’s registered bank account and used to purchase units of the desired mutual fund schemes.
How are SIP investments beneficial?
SIP investments ensure investments in the market irrespective of the market condition. As a result, an investor ends up investing in the markets both in the bull market phase and the bear market phase. In essence, an investor ends up achieving more units of mutual fund scheme when the markets are low than when the markets are high. This averages out the total cost of the mutual fund units purchased. This concept is known as rupee cost averaging.
SIP investments also inculcate the habit of financial and investment discipline among investors as regular and automated investments are made in the desired schemes. This is an important concept in the world of investing.
An investor also enjoys the benefits of the power of compounding, also claimed as the eighth wonder of the world by several investors. This allows them to enjoy higher returns when invested for a prolonged duration.
Lastly, SIP investments are light on the pockets of the investors. As an investor, you can invest as low as Rs 100 per month in mutual fund via SIP.
Using SIP calculator
SIP calculator helps to realise the potential returns on the mutual fund investments at the end of investment tenure. To earn Rs 5 crore by the age of 45, let’s assume you start investing by the age of 25. This gives you a investment duration of 20 years. Let’s assume you invest in a scheme with average returns at 12% per annum. Using SIP calculator, it can be evaluated that one needs to invest around Rs 50,543 to achieve a corpus of Rs 5 crore. Though this might seem a significant amount, you can start with a smaller amount and gradually increase your investment amount with step-up SIP as your income increases. This will ensure that you save a certain part of your income and invest it for better future. However, one must note that the value of Rs 5 crore is likely to depreciate over time, especially over a prolonged duration such as 20 years. Keep that in mind before you plan your mutual fund investments and create a financial plan. Happy investing!