How to be a crorepati! Use this simple SIP trick to save over Rs 1 crore with just over Rs 5,000 investment per month

How to be a crorepati! Use this simple SIP trick to save over Rs 1 crore with just over Rs 5,000 investment per month

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How to become a crorepati with mutual fund SIPs: Saving Rs 1 crore might seem daunting, but with discipline and financial know-how, it’s achievable. By starting with a monthly investment of just Rs 5,400 and leveraging the power of systematic investment plans (SIPs), you can reach your goal. Here’s how you can do it.

What are SIPs and step-up SIPs?

As per an ET analysis by Anulekha Ray, SIPs allow you to invest a fixed amount in mutual funds at regular intervals, whether daily, weekly, or monthly.While standard SIPs are beneficial, step-up SIPs can significantly enhance your investment growth. A step-up SIP involves increasing your investment amount periodically, typically annually, as your income grows. This strategy maximizes your returns through the power of compounding.

Using SIPs to get over Rs 1 crore

  • For example, if you start a SIP with Rs 5,400 per month at a 12% annual interest rate, you will have Rs 49.6 lakh after 20 years.
  • If you increase your investment by 5% each year, you’ll invest Rs 5,670 per month in the second year and Rs 5,953.5 per month in the third year. After 20 years, this 5% annual increase will grow your investment to Rs 68.87 lakh.
  • If you raise your SIP by 8% each year, you’ll have Rs 85.92 lakh after 20 years. Increasing your SIP by 10% annually will result in Rs 1.06 crore after 20 years.
SIP mutual fund at 12% return every year
No of years you stay invested
SIP amount every month Annual increase Return after 10 years Return after 15 years Return after 20 years Return after 25 years
Rs 5,400 No Rs 12.09 lakh Rs 25.07 lakh Rs 49.67 lakh Rs 91.9 lakh
Rs 5,400 5% Rs 14.54 lakh Rs 33.43 lakh Rs 68.87 lakh Rs 1.34 crore
Rs 5,400 8% Rs 16.32 lakh Rs 39.66 lakh Rs 85.92 lakh Rs 1.74 crore
Rs 5,400 10% Rs 17.65 lakh Rs 44.68 lakh Rs 1.06 crore Rs 2.12 crore
Rs 5,400 15% Rs 21.59 lakh Rs 61.20 lakh Rs 1.54 crore Rs 3.65 crore

Table source: ET
As you can see, starting with Rs 5,400 per month and increasing it each year can help you reach Rs 1 crore. Even small yearly increases can significantly boost your final portfolio value over time.

Benefits of step-up SIPs

Accelerated wealth creation
One key reason to choose a step-up SIP is to grow your wealth faster. Mutual funds can provide good returns if you invest long-term. Investors often use SIPs for goals like children’s education, marriage, buying property, or retirement.
Countering inflation
A step-up SIP is beneficial because it counters inflation and adjusts your savings with income increases, like salary hikes.
Adapting to income growth
Many salaried people get annual raises, so financial advisors recommend increasing your SIP amount each year.

Important considerations for step-up SIPs

Income stability
The idea behind a step-up SIP is that your income will rise every year. If you choose a percentage-based step-up SIP, you need to adjust your cash flow to match. However, job loss or a family member losing income can make it hard to increase your SIP amounts annually.
Long-term commitment
If you stop increasing your SIP investment each year, it will affect your total returns. However, if you continue raising it, you’ll benefit in the long run. If your income increases more than expected, you can raise your SIP by a larger amount and reach your goal sooner.

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