SIP (Systematic Investment Plan) is an investment strategy for mutual funds. By following the 5x12x40 formula and investing a fixed amount at regular intervals, you too can become a crorepati.
Everyone saves their hard-earned money to improve their children's future. By investing that money in SIP, not only will the child's future improve, but you can also become a crorepati. There is a simple SIP formula for this: 5x12x40.
What is SIP?
SIP (Systematic Investment Plan) is a convenient and disciplined way to invest in mutual funds. A fixed amount is invested at regular intervals (monthly, quarterly, or annually). This allows small investments to grow into a large sum over time.
Benefits of SIP Investment:
Consistent investing builds financial discipline. Small investments yield big returns. You can start investing with just Rs.500. Despite market fluctuations, the average cost of your investments remains low. By investing for the long term, investors earn compound interest. SIP is flexible. You can increase, decrease, or stop your investment at any time. SIP is useful for long-term goals like children's education, buying a house, or retirement planning.
How SIPs work?
You choose a mutual fund scheme and decide the investment amount. This amount is deducted from your bank account on a fixed date each month and invested in the mutual fund.
Fund units are purchased with the invested money. Their number depends on the fund's NAV on that day. The investment grows over time. Returns are earned based on the fund's performance in the market.
What is the SIP 5x12x40 formula?
This formula can be easily understood as being for your child. That is, when your child turns 5, you should deposit Rs.5000 every month in his name. The important thing is that you have to continuously deposit Rs.5000 every month for 40 years. You can get an annual return of around 12% on this. When your son or daughter turns 45, he will get Rs.6 crores.
How can a 5-year-old become a crorepati through SIP?
Even a 5-year-old child can get Rs.6 crores by investing through SIP. For this, Rs.5000 should be deposited every month until the child turns 18. When your child turns 18, this SIP account will be transferred to his name. And he will automatically deposit his money every month. He has to deposit Rs.5000 every month till he turns 40. He will get around Rs.6 crores when he turns 40.
How much return will I get on SIP?
Investing in equity mutual funds through SIP gives an average annual return of 12%. If you deposit Rs.5000 monthly from the age of 5 to 40 in about 480 installments. The total deposit will be Rs.24 lakhs. This will get a return of about 12%.
From Rs.5000 to Rs.6 Crores:
Let's say you deposit Rs.5000 every month in your child's name. When he turns 40, the total investment amount will be Rs.24 lakhs. This would have earned a 12% annual return. This will give a return of approximately Rs.5,70,12,101. If you add the total investment amount of Rs.24 lakhs and the return amount of Rs.5,70,12,101, you will get Rs.5,94,12,101. That is, you will get around Rs.6 crores.
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