How Much Monthly SIP Is Needed to Save 10 Lakh Rupees in 5 Years

Systematic Investment Plans (SIPs) offer a smart and disciplined way to invest in mutual funds, allowing you to build wealth over time. If you’re aiming to save 10 lakh rupees within 5 years, you need to determine the monthly investment amount that can help you reach this goal. This guide explains how to calculate the right SIP amount and provides a simple calculation method to help you get started.

How Much Monthly SIP Is Needed to Save 10 Lakh Rupees in 5 Years
How Much Monthly SIP Is Needed to Save 10 Lakh Rupees in 5 Years

What Is a SIP?

A SIP is a method of investing a fixed amount into a mutual fund at regular intervals—usually monthly. This systematic approach allows you to benefit from rupee cost averaging and compounding, which can contribute to substantial growth over time.

Estimating the Expected Return

Before calculating how much you need to invest monthly, you must consider the expected rate of return. For equity mutual funds, a common benchmark for the average annual return is about 12%. However, it’s important to remember that this is just an estimate, and actual returns can vary depending on market conditions.

How Much Monthly SIP Is Needed to Save 10 Lakh Rupees in 5 Years
How Much Monthly SIP Is Needed to Save 10 Lakh Rupees in 5 Years

Calculation Approach

With an expected annual return of 12%, let’s calculate how much you would need to invest monthly to reach 10 lakh rupees in 5 years. The following table outlines the estimated portfolio growth over 5 years, assuming a consistent monthly SIP and 12% annual return:

Year Monthly SIP Annual Return Total Investment Portfolio Value
1 RS 13,500 12% RS 1,62,000 Rs 1,72,924
2 RS 13,500 12% RS 1,62,000 Rs 3,67,679
3 RS 13,500 12% RS 1,62,000 Rs 6,01,473
4 RS 13,500 12% RS 1,62,000 Rs 8,81,651
5 RS 13,500 12% RS 1,62,000 Rs 11,15,450

 

What the Numbers Mean

Monthly SIP: This is the amount you invest every month. In this case, Rs 13,500.

Annual Return: The assumed annual return, set at 12% for this example.

Total Investment: This is the cumulative amount you’ve invested each year.

Portfolio Value: The estimated value of your investment after compounding.

How Much Monthly SIP Is Needed to Save 10 Lakh Rupees in 5 Years
How Much Monthly SIP Is Needed to Save 10 Lakh Rupees in 5 Years

With a monthly SIP of Rs 13,500 and an assumed 12% annual return, your portfolio could grow to approximately Rs 11.15 lakh in 5 years. This is above your 10 lakh rupees goal, providing a buffer for any unexpected fluctuations.

Key Takeaways

To save 10 lakh rupees in 5 years with a SIP, you’d need to invest around Rs 13,500 each month, assuming a 12% annual return. Keep in mind that this is just an estimate; actual returns can vary. Therefore, it’s wise to stay informed about market trends and adjust your strategy as needed.

Conclusion

Consulting with a financial advisor is always a good idea, especially when you’re planning long-term financial goals. They can help tailor your investment strategy to your specific needs and risk tolerance. Additionally, keep track of your investments regularly to ensure you’re on course to meet your financial objectives.

Sharing Is Caring:

Leave a Comment