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Let’s say you invest Rs 500 every month in a mutual fund SIP that gives a 12% annual return, then over five years, your total investment would be Rs 30,000
A good rule of thumb many experts suggest is increasing your SIP by 10% each year. (Representative Image)
There’s a common myth floating around that investing is only for the rich. But here’s the thing; even Rs 500 a month can get you started. No windfall, no inheritance, no lottery ticket needed. Just discipline, patience, and a plan.
According to investment advisors, the Systematic Investment Plan, better known as SIP, is one of the most effective ways to build wealth over time. And you don’t need a fat paycheck to do it. If you can spare Rs 500 after meeting your monthly expenses, you can begin.
The key? Staying invested for the long haul.
Let’s say you invest Rs 500 every month in a mutual fund SIP that gives a 12% annual return, a reasonable estimate based on long-term equity fund performance. Over five years, your total investment would be Rs 30,000. Thanks to compounding, you’d earn around Rs 10,552 in returns, making the total value Rs 40,552. And because equity mutual funds held over one year are largely tax-free (up to Rs 1 lakh in gains annually), your returns remain untouched by the taxman.
Now stretch that horizon to 10 years. You invest Rs 60,000 in total. Your investment grows to an estimated Rs 1.12 lakh, with Rs 52,018 as pure gains. Again, tax-free.
Why It Works
Small SIPs benefit from compounding, where your returns start earning their own returns. But compounding only works when you give it time. The longer you stay in, the more it rewards you.
Also, SIPs help cut through market noise. Since you’re investing regularly, you automatically buy more units when prices dip and fewer when they rise. Over time, this evens out volatility.
A good rule of thumb many experts suggest is increasing your SIP by 10% each year. So, start with Rs 500 a month this year, then Rs 550 next year, Rs 605 the year after, and so on. This small annual step-up can supercharge your wealth creation, all without feeling like a burden on your budget.
Choose The Right Fund
SIPs are a tool. The performance depends on where you park that money. Explore different mutual fund categories – equity funds for long-term growth, debt funds for stability, or hybrid funds for a mix of both. Match them to your financial goals, whether it’s building a safety cushion, buying a home, or planning for early retirement.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
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