**Systematic Investment Plan (SIP) can make you millionaire! **

It is a magical tool to make you crorepati and create wealth with time. Today we will see how this magical concept works with calculations. SIP is all about power of compounding, how well you are maintaining it, how systematic you are with it, how patient you are in any situation of the markets and how consistent you are? In addition, you also have to take care of inflation which is very important. Do you want to become a millionaire, Start an SIP.

For Eg:- If you are in your 20s and have a good job, yielding you a handsome salary then you think you are sorted, right? However, If you ask me I would say only 50%!

For instance, your salary is 6 Lakh p.a, that would be 50000 per month. Above all how would you allocate towards investing and SIP we will see.

You could just start saving at least 30-40% of your salary on monthly basis and rest you can use for your luxury purposes. In other words you can spend it on iphones, shopping, dinner etc.

For instance that 35% of your salary is going towards SIP on a monthly basis, let’s see some calculations:-

SIP amount = 17500 (35% of 50000)

Fund Category = Equity

Expected Returns = 14% CAGR

Tenure = 20 years

Invested value will be = 42 Lakhs

Your Estimated returns would be = 1.88 Cr

Your Total value after 20 years = 2.30 Cr

Rate | 1.16666666666667% |

Tenure | 240 |

PMT | -17500 |

PV | 0 |

FV | ₹ 2,30,36,059.81 |

This is how you calculate, the future value of SIP. As a result you will be getting a good compounding rate at a longer period of time. Therefore there is a piece of advice to each and every one out there that if you haven’t started your SIP or investments please start because you are missing out on some good profits. SIP is definitely a key to become a millionaire.**What is Power of Compounding?**

Reinvestment of earnings at the same rate of return to grow the principal amount every year is compounding. Compounding is a compelling concept. It is because the interest of your invested money is also earning interest. This is known as compound interest. Therefore the value of the investment keeps growing at a geometric rate (always increasing) rather than at an arithmetic rate (straight-line). However, reinvesting of your earnings at the same compound interest rate of return would help you in continually growing the principal amount year-on-year. Above all it helps you create wealth at a longer period of time, it helps you achieve your goals etc.

**Benefits of compounding**

Easy and Simple – You don’t have to do the calculations now, as you have a facility of financial calculators which can help you do all the calculations.

Time Saving – You can do the calculations within minutes as you don’t have to remember the formulas.

Helps to make your future secure – With the help of calculations your future is secured and can easily achieve the desired goals.

Free to use the calculator on our platform – The calculator is online and free to use, because all these features are available on our platform.

Therefore, we recommend you to visit www.myfundsip.com and use our calculator tool to calculate your goals future value and start investing.

**Key Rules of Power of Compounding**

– Start when you are young, so that you can achieve your long term goals very easily by investing small chunks. Because at that time you will not have any family responsibilities, or you don’t have to spend on household expenses, so that makes it easier for you to invest at a younger age.

– Make systematic payments, so it makes you invest on a periodic basis in your investment journey. Stay invested for long term with consistency. Don’t let the market’s volatility affect your investments because if you will, then you will lose out on the best returns possible.

– Be Patient – When you are investing in equites even with SIP, be patient. Markets will be volatile every time, you don’t have to worry because you are investing for long term. Markets can generate -ve returns or very less returns (2-5%) too some years but when you are patient at that times, it shows your nature towards your investment.

In conclusion, I would like to say to each one out there that as soon as you start the SIP it will surely benefit you at a longer period of time.

Drop a comment what do you think about it???

– Pooja Patel, CFP CM

Nice explanation

Thanks, stay tuned for weekly blogs like this.

Visit our website http://www.myfundsip.com

Hey,

Thanks for this beautiful info.

I am Glad you liked and find it useful.