Example for your knowledge purpose – Crorepati Calculation:
You can become a millionaire by saving just Rs 375 every day, this is how SIP works.
How capable the SIP is to meet the financial goals can be gauged from the fact that by investing just Rs. 375 every day, you can become a millionaire in 20 years.
Some investors are afraid of the volatility of the stock market and such investors invest through mutual funds. Systematic Investment Plan (SIP) is a special mutual fund through which you can build a large corpus in the long run by investing minimum capital on a regular basis. How capable the SIP is to meet the financial goals can be gauged from the fact that by investing just Rs 375 every day, you can become a millionaire. There are many such mutual fund schemes in which investments for 15 or 20 years have given returns of more than 12 percent.
This is how you can become a millionaire in 20 years –
Daily savings; Rs 375/ –
Monthly SIP: Rs. 11250/ –
Estimated Return: 12%
Investment amount in 20 years: Rs. 27, 00,000/-
Total SIP value in 20 years: Rs. 1, 12, 40,414/-
Profit: Rs. 85, 40,414/-
Now you will see how online SIP calculator works:-
You can use an online SIP calculator to find out how much investment is required to achieve your financial goals in the long run. It is absolutely available and can be easily found on Google. This calculator gives an estimate of the investment amount as per the expected returns. It works on the formula M = P × ({[1 + I] n – 1} / I) × (1 + I). In this, M is the maturity amount, P is the amount to be invested at regular intervals, n is the number of times to be invested and I is the periodic rate of interest. For example, you want to invest Rs 1,000 every month for the next 12 months and the periodic rate of interest is 12 percent. To calculate M i.e. maturity amount, the values P (1 thousand rupees), n (12 months) and I (periodic rate of return = 12%/12 = 1/100 = 0.01) have to be input in the formula. Under the calculation, the value of M is coming to Rs 12809.
This means that if you do a SIP of Rs 1000 every month and you are getting 12 per cent return on it, then in a year your investment will increase to Rs 12809.
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