Saving Rs 50 a day in a SIP could build a Rs 25 lakh fund over 25 years, calculation shows
A monthly SIP of Rs 1,500 for 25 years at an assumed 12 per cent average return could grow to over Rs 25 lakh, the calculation says.
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One cannot say what situation life may bring next, which is why saving is important. For those who want to build a fund of lakhs of rupees through small savings, the arithmetic is worth understanding. Setting aside a large sum in one month is difficult, but saving just Rs 50 a day can build a fund of Rs 25 lakh, the calculation shows.
Raising Rs 25 lakh does not require lakhs of rupees in hand at the start. Saving just Rs 50 a day can achieve it. One only has to pick a good mutual fund and start a systematic investment plan (SIP) in it.
The calculation assumes a daily saving of Rs 50, which is Rs 1,500 a month. The investment is to be continued for 25 years, with an average return assumed at 12 per cent. The total investment over the 25 years is Rs 4,50,000, while the fund created over 25 years is shown as Rs 25,53,310.
The calculation makes clear that by saving Rs 50 a day, an investment of only Rs 4.5 lakh can grow into a fund of more than Rs 25 lakh. The longer the investment is continued, the greater the benefit of compounding.
Another question is whether to do a daily SIP or a monthly one. If the salary arrives on time and a large sum can be set aside from it, a monthly SIP can be taken. But if the salary does not arrive on time, saving small amounts daily can also prove beneficial.
Some things need to be kept in mind. Investment in the share market is not safe, because the market goes up and down. Keep money aside for daily expenses and sudden needs, and invest only surplus savings. Do not change decisions frequently because of daily ups and downs in the market.
Investment in mutual funds is subject to market risk. The information given here is not investment advice. Consult a financial adviser before investing in any scheme.
