Tuesday, December 18, 2018

| Can Rs.47 invested daily make you Crorepati? Yes, read on! |

Can Rs.47 invested daily make you Crorepati? Yes, read on!

Today we will discuss the Systematic Investment Plan(SIP) and power of compounding, together working for us all round the clock to make us crorepatis. All you need is Rs. 47 daily or Rs.1427 monthly. 
First, how Rs.47 can make you crorepati?

Rs.47 or Rs.1427 monthly when invested in SIP for a period of 30 years and assuming interest rate earned during this period is 15%(not a big percent for 30 years) then as per calculations, the amount you will get after 30 years will be :

Total amount you receive – Rs. 1,00,03,014

How much you invested in 30 years – only Rs. 5,13,720

How much interest you earned – whooping Rs. 9,489,294

You can see above that you did little but timely investment and your investment together with compounding benefits did all the hard work to make you crorepati.

Above scenario is good for those who has just started their job and is around age of 20-25 years. So when they turn to age of 50-55 years they have 1 crore in their investment. It’s worthwhile to mention that I have not taken into account your other investments and yeah, market can award you more than 15% we have assumed. 

Of course, market can also go down but as per past trends, at least 10% have been earned from market if period of investment is more than 10 years. In short term, you will not really enjoy power of compounding and market is more risky in short term, so SIP may not be the right instrument to invest.

I am 30+ or 40+, so have I missed the benefits?

No, not really!

12% return can be safely assumed for investment of more than 10 years. So, if you want to be a crorepati then you will have to invest more.

For example, to be crorepati in next 20 years you will have to invest Rs. 10,009 assuming 12% return.

Similarly, you will have to invest Rs. 43,041 monthly to be crorepati assuming 12% return.
You can also find amount to invest as per your requirement from the following calculator:

or, you can simply use the formula in excel:



1.25% = monthly rate of return

360 = number of months to invest

1427 = amount to invest

0 = default

1 or 2 = investment starts from beginning of month or end of month

A big challenge is that initially returns in SIP are less or may be negative. A market crash can add more to losses. But as you are investing every month, therefore, when market is slow and the units in which you have invested is cheaper then actually you are buying more units. So, in long term, when you have more units and prices improved, you are benefitted.

However, you have to be vigilant about your investment and should switch Funds if they are not making positive returns while other Funds are doing well. Best is to take help of Financial advisors who help you to invest without any fee.

Bajaj Capital is one of the advisor which houses almost all funds you want to invest.

ALWAYS NOTE THAT MARKET INVESTMENTS ARE SUBJECT TO RISK. The return you expect may or may not be as per above calculations. Author does not take any responsibility of any losses. Refer this information for guidance only.

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