Mutual funds: Consistency is key to long-term investment success. If you want to accumulate a substantial amount, it is imperative to set aside a small sum every month (in the form of systematic investment plans or SIPs) and allow it to grow over a period of time.
Suppose you have a financial goal of accumulating ₹50 lakh in the next 10 years for something very specific, say buying a car or sending your child for higher studies. You are recommended to invest in mutual funds, preferably via SIPs.
We have done a few calculations to help you find out how much consistent investment is required to create the desired corpus of ₹50 lakh in a span of 10 years.
Multiple scenarios
We have also considered multiple scenarios in which you could save this amount of money.
Scenario I (Rate of return is 9% a year): To be able to save ₹50 lakh, you need to invest an SIP of ₹25,837.89. This way, you will invest a total of ₹31 lakh.
Scenario II (Rate of return is 10% a year): To be able to save ₹50 lakh, you would need an SIP of ₹24,408.70. Overall, you need an investment of ₹29.29 lakh to accumulate ₹50 lakh.
(Source: Goal SIP calculator; calculations show how much SIP is required to accumulate ₹50 lakh )
Scenario III (Rate of return is 11% a year): Now, if the rate of return is 11% per annum, you would need an SIP of ₹23,041.67. This would lead to a total investment of ₹27.65 lakh.
Scenario IV (Rate of return is 12% a year): In case the rate of return is 12% a year, one would need an investment of ₹21,735.47. This means investing a total of ₹26.08 lakh to accumulate ₹50 lakh.
After comparing the returns on SIPs over a period of 3 to 15 years, a recent report by WhiteOak Capital Mutual Fund noted that although equities have proven to be a volatile asset class, the volatility reduces as investors increase their investment horizon.
It has concluded that a successful SIP is more about starting early, maintaining the discipline of investing regularly, and investing for the long term to achieve financial goals.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision.
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