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Systematic Investment Plan (SIP) is an effective method in which you invest a fixed amount at regular intervals. If you are wondering how you can earn Rs 3 crore with a SIP of Rs 1000, then in this article we will understand in detail the process and calculations to achieve this goal.
What is SIP?
SIP is an investment plan in which you invest a fixed amount every month. This investment is usually made in mutual funds. The advantage of SIP is that it allows you to invest regularly even with a small amount and get good returns over time.
Calculation: How to earn Rs 3 crore from a SIP of Rs 1,000
- Investment period: 30 years
- Amount of investment: ₹1000 per month
- Average Annual Return: 12% (This is the average return over the history of mutual funds, but it may change)
How to do the calculation
To estimate the amount we will receive in the future from SIP, we use the compound interest formula. The formula for SIP is as follows:
A=P×(1+r)n−1rA = P \times \frac{(1 + r)^n – 1}{r}
Where:
- A.A.A. = Amount received in future
- P.P.P. = Monthly Investment (₹1000)
- rr = Monthly return rate (divide the annual return rate by 12)
- nn = Total number of investments (in months)
Calculation by example
- Monthly Investment (P): ₹1000
- Annual Return (r): 12% (0.12)
- Monthly Rate of Return (r/12): 0.12 / 12 = 0.01 (1%)
- Total number of investments (n): 30 years × 12 months = 360 months
Now, plug these values into the formula:
A=1000×(1+0.01)360−10.01A = 1000 \times \frac{(1 + 0.01)^{360} – 1}{0.01}
A=1000×(1.01)360−10.01A = 1000 \times \frac{(1.01)^{360} – 1}{0.01}
A≈1000×(36.05)−10.01A ≈ 1000 \times \frac{(36.05) – 1}{0.01}
A≈1000×3504.78A ≈ 1000 \times 3504.78
A≈₹3,50,47,800A ≈₹3,50,47,800