Want to create a corpus of ₹50 lakh from a SIP of ₹5,000? Know how many years to invest for 10, 12 and 15% returns, see complete calculation

Systematic Investment Plan i.e. SIP in Mutual Funds has become the most disciplined way for small investors to achieve financial freedom and create a large wealth corpus in the long term. Amidst the ups and downs of the stock market and inflation, if an investor saves just ₹ 5,000 every month and regularly invests in equity mutual funds, then with the power of compounding, he can easily create a huge fund of ₹ 50 lakh. However, how long it will take you to reach this point depends on what percentage of average annual return (CAGR) your portfolio is getting. According to financial analysts, looking at the historical performance of the Indian stock market and mutual funds, over the long term (15-20 years) equity funds have typically delivered annual compound returns between 10% to 15%. Let us know for how many years you have to continue a monthly SIP of ₹5,000 at expected returns of 10%, 12% and 15%.

The CAGR of the last 15 to 20 years for large cap and flexi cap funds in the Indian mutual fund industry is considered to be standard and realistic returns around 12%. If your portfolio generates 12% annual returns, a target of ₹50 lakh is fine. 20 years (240 months) Will be completed in.

• Monthly Investment: ₹5,000

• Total investment period: 20 years (240 months)

• Total principal deposited from your pocket: ₹12,00,000 (₹12 lakh)

• Net profit earned through compounding (Capital Gain): ₹37,95,740 (approximately ₹38 lakh)

• Total fund value after 20 years: ₹49,95,740 (approximately ₹50 lakh) The most important thing about this calculation is that of the total fund of ₹ 50 lakh received after 20 years, your own deposit will constitute only 24% (₹ 12 lakh), while 76% (approximately ₹ 38 lakh) will be the profit of compound interest only. If you extend it by just one more year to 21 years, this fund will grow directly into ₹56.93 lakh It happens.

If you invest in aggressive categories like Mid Cap, Small Cap or Focused Equity funds and the market performance remains strong, 15% annual returns can be expected. To touch the magic figure of ₹50 lakh at 15%, you need to Around 17 years 5 months (209 months) It will take time.

• Monthly Investment: ₹5,000

• Investment Period: 17 years 5 months (about 17.4 years)

• Total Principal Deposit: Approximately ₹10,45,000 (₹10.45 Lakh)

• Profit earned by compounding: Approximately ₹39,55,000 (₹39.55 Lakh)

• Total Maturity Corpus: ₹50,00,000 (₹50 lakh) If you continue investing for the full 18 years, your total investment will be ₹10.80 lakh and at 15% return, your total fund will grow to Rs. ₹55.21 lakh Will be done. That means if you get 15% return as against 12%, your target is achieved almost two and a half years earlier.

If you are a highly conservative investor and invest primarily in large-cap index funds (Nifty 50) or hybrid/balanced advantage funds where volatility is low, then an annual return of 10% is a safe estimate. To create a fund of ₹ 50 lakh at the rate of 10%, you need to About 22 years 4 months (268 months) Will have to invest continuously till then.

• Monthly Investment: ₹5,000

• Investment Period: 22 years 4 months (approximately 22.4 years)

• Total Principal Deposit: Approximately ₹13,40,000 (₹13.40 Lakh)

• Profit earned by compounding: Approximately ₹36,60,000 (₹36.60 Lakh)

• Total Maturity Fund: ₹50,00,000 (₹50 lakh) If you complete 23 years, your accumulated capital will be ₹13.80 lakh and the total corpus will be ₹53.72 lakh But will reach. Lower returns mean that you will have to give the market an additional 2 to 5 years to reach your goal.

If you don’t want to wait for 20 years and want to build a corpus of ₹50 lakh as soon as possible, financial advisors ‘Step-up SIP’ Recommend adopting the strategy of. As your income or salary increases by 8 to 10% every year, step-up your monthly installment of ₹ 5,000 by 10% every year. For example, deposit ₹5,000 per month in the first year, ₹5,500 per month in the second year, ₹6,050 per month in the third year. With this formula, the target of 12% annual return which is achieved in 20 years in a normal SIP, can be achieved only through a step-up SIP. 16 years It gets completed in itself.

It is also important to understand the income tax rules while investing for the long term. Profits on units of equity mutual funds held for more than 1 year are considered Long Term Capital Gains (LTCG). Under income tax rules, long term capital gains up to ₹1.25 lakh per financial year are completely tax-free. Flat LTCG tax at the rate of 12.5% ​​is applicable on net profits above ₹1.25 lakh. Whenever you redeem your funds after 17 to 20 years, you can minimize this tax liability by doing a Systematic Withdrawal Plan (SWP) or by making lump sum withdrawals.