You can invest in mutual funds through systematic investment plans (SIPs). This is a way of investing in which you do not have to invest a lot of money. You can get good results by investing a little every month. Let’s take a look at how much funds can be generated from a monthly SIP of Rs 5,000 and how the 12+12+20 formula can make your investment journey easier.
SIP calculation: what is the return from rupees 5000?
Suppose, you start a SIP of Rs 5000 every month. If you continue it for 10 years and get an average 12% annual return, how much will be your fund?
- Investment: Rs 5000 per month
- Duration: 10 years
- Estimated return: 12%
According to this calculation, after 10 years, your total fund could reach Rs 11.61 lakh Your invested principal will be Rs 6 lakh, the rest will come from returns. It is the magic of compound interest (compounding), which increases your money manifold in the long run.
12+12+20 formula: Easy to invest mantra
If you are thinking of starting to invest in SIPs or improve it, the 12+12+20 formula can be a game-changer for you. This formula makes investment simple and effective. Let’s understand:
- 12% investment: Place 12% of your monthly income for SIPs. This amount will not affect your day-to-day expenses or emergency funds.
- 12% returns: On an average, 12% returns can be expected in mutual funds. However, it depends on the performance of the market, so the returns can be more or less.
- 20 Years Investment: Long term investment gives the benefit of compounding. Investing for 20 years can increase your fund manifold.
By adopting this formula, you can easily achieve your investment goals.
Why is SIP important?
SIP investment is a way to reduce risk and increase returns. Some of the advantages:
- An SIP can be started with an amount as low as Rs 500.
- Flexibility: You can increase the amount as per your requirement.
- Management of Market Risk: Rupee cost averaging reduces the impact of market volatility.
- Diversification: Diversify your portfolio further reduce the risk.
Tips for smart investments
- Diversify the portfolio: Invest in a variety of funds, such as large-cap, mid-cap and small-cap funds.
- Long-term perspective: The longer you spend in SIPs, the more you benefit.
- Regular review: Review your investments from time to time and change funds as and when needed.
Conclusion
A mutual fund SIP allows you to create a small fund for your future. You can make your investment more effective by adopting the 12+12+20 formula. If you make a SIP of Rs 5,000 per month, you can create a fund of more than Rs 11 lakh in 10 years So do not delay, start the SIP today and achieve your financial goals!
Frequently asked questions
Q1: How much can I earn by investing Rs 5,000 per month in SIPs for 10 years?
Answer 1: At an average annual return of 12%, your total fund could be around Rs 11.61 lakh in 10 years.
Q2: What is the formula of 12+12+20 SIP?
Answer 2: Invest 12% of your monthly income, target 12% returns and stay invested for 20 years.
Q3: Can I start SIP with just Rs 500?
Answer 3: Yes, most mutual funds allow SIPs to be started with an amount less than Rs 500 per month.
Q4: Is SIP risky?
Answer 4: All market-related investments carry risk, but SIP helps manage market volatility through a cost average of rupees.
Q5: Can I ever change or discontinue my SIP?
Answer 5: Yes, SIPs are highly flexible, so you can change, stop or turn them off at any time.
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