The Plan:
Start at Age 20: Begin with a modest SIP amount, say ₹5,000 per month.
Increase SIP by 10% Every Year: Every year, increase your SIP by 10% of the previous year's contribution. This is crucial because:
The more you invest, the more you can take advantage of compounding.
The earlier you start, the longer your money has to grow.
Why It Works:
Compounding Power: Compounding essentially means earning returns on your returns. In the case of SIP, your principal amount earns interest, and this interest is reinvested to generate more interest.
Rupee Cost Averaging: SIPs allow you to invest a fixed amount regularly, irrespective of market conditions. This strategy averages the cost of buying units, especially beneficial in volatile markets.
Consistent Growth: By increasing your SIP every year, you're not only investing more but also leveraging the power of inflation and growth in your wealth.
Example Scenario:
Let’s say you start with ₹5,000 a month at the age of 20. You increase it by 10% every year and assume an average return of 12% annually.
Year 1: ₹5,000/month for 12 months = ₹60,000
Year 2: ₹5,500/month for 12 months = ₹66,000
Year 3: ₹6,050/month for 12 months = ₹72,600
... and so on, increasing each year.
Over the course of 30 years, this consistent increase, combined with the 12% returns, can result in a large corpus, often crossing ₹1 crore or more, depending on the starting amount and rate of return.
Why You’ll Become a Millionaire:
If you stick to the plan and allow your investments to grow at the average market rate, the value of your SIP will compound massively over time. After 30 years, your money will have grown exponentially, making you a millionaire, and possibly even a multi-millionaire.
The key takeaway? The earlier you start and the more disciplined you are with increasing your SIP, the more powerful compounding becomes. Even small amounts, if invested consistently, can lead to huge wealth over time.
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