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Having a large wealth corpus is the biggest need of today’s times to achieve financial independence and live a peaceful life after retirement. If your goal is to create a retirement fund of ₹5 crore by the age of 60, then it is completely possible. You can achieve this goal by taking advantage of the ‘Power of Compounding’ in the long run through Systematic Investment Plan (SIP) in Mutual Funds. However, the sooner you start investing, the less will be the monthly burden on your pocket.
Monthly SIP required for ₹5 crore as per age
Equity mutual funds have an average long term (15 to 35 years) Estimated Annual Return (CAGR) of 12% This calculation has been done assuming:
| current age | Investment period up to 60 years | Required Monthly SIP (at 12% Returns) | total principal amount | Estimated Profit (Wealth Gain) |
| 20 years | 40 years | ₹4,250 | ₹20.40 lakh | ₹4.80 crore |
| 25 years | 35 years | ₹7,750 | ₹32.55 lakh | ₹4.68 crore |
| 30 years | 30 years | ₹14,200 | ₹51.12 lakh | ₹4.49 crore |
| 35 years | 25 years | ₹26,400 | ₹79.20 lakh | ₹4.21 crore |
| 40 years | 20 years | ₹50,100 | ₹1.20 crore | ₹3.80 crore |
| 45 years | 15 years | ₹1,00,200 | ₹1.80 crore | ₹3.20 crore |
The biggest advantage of starting early: time vs. money
It is clear from the above table that time plays the most important role in building your wealth:
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Beginning at age 20: If a youth starts a SIP of only ₹ 4,250 per month as soon as he gets a job at the age of 20, then he will have to invest only ₹ 20.40 lakh from his pocket in 40 years and at the age of 60, a fund of ₹ 5 crore will be ready.
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Heavy cost of delay: If a person makes the same plan at the age of 40, he will have to do a huge SIP of ₹50,100 every month and invest a total of ₹1.20 crore from his own pocket.
Step-up SIP: A way to achieve big goals even with low income
If you cannot initially invest a large amount like ₹14,000 or ₹26,000 every month, then ‘Step-up SIP’ is a great strategy. In this, you increase the SIP amount by 10% every year according to the increase in your salary or income.
For example, if you start with ₹7,500 per month at the age of 30 and make a step-up of 10% every year, by the age of 60 you can easily build a corpus of ₹5 crore with returns of 12%.
Financial rules necessary for the target of ₹5 crore
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Diversified Portfolio: Choose a balanced mix of large cap, flexi cap and mid cap funds for a long term vision.
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Continue SIP in market fluctuations: When the stock market falls, you get higher NAV units, which give huge returns when the market recovers.
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Keep an emergency fund aside: Don’t withdraw money from your retirement portfolio midway, create a separate liquid fund for medical and emergency needs.