Systematic Investment Plan (SIP) is one of the most popular ways of investment nowadays. Under this scheme, you invest a fixed amount every month, which can give very good returns in the long run. Keeping in mind the investment period, rate of return and risk in SIP, it is necessary to understand how much profit will be there on your investment.
What is SIP?
SIP is an investment plan in which you invest a fixed amount at regular intervals. This investment is usually in mutual funds. The speciality of SIP is that you can invest small amounts regularly, which can create a good fund in the long term.
Investment period and potential returns
Suppose, you invest Rs 1000 every month in SIP. Here we will calculate the potential returns for three different periods:
Investing for 10 years
- Total investment: Rs 1000 per month × 12 months × 10 years = Rs 1,20,000
- Return (12% per annum): approx Rs 1,12,339
- Total amount (investment + return): approx Rs 2,32,339
If the return is 10% per annum
- Return: approx Rs 86,552
- Total amount (investment + return): approx Rs 2,06,552
Investing for 15 years
- Total investment: Rs 1000 per month × 12 months × 15 years = Rs 1,80,000
- Return (12% per annum): approx Rs 2,37,924
- Total amount (investment + return): approx Rs 4,17,924
If Returns at 10% per annum
- Returns: Approx Rs 1,57,924
- Total amount (investment + returns): Approx Rs 3,37,924
Points to consider while investing
- Return prospects: SIP returns depend on market conditions. It is important to keep market prospects in mind before expecting high returns.
- Risk: Risk cannot be ignored while investing in SIP. So always consult the concerned financial advisor before investing.
- Long-term benefits: Investing in SIP for a long time can give better returns, as it has the benefit of compounding.
Conclusion
SIP can be a great investment option if you invest regularly and have patience for the long term. With the right planning and understanding, SIP can prove to help achieve your financial goals. Do not forget to evaluate your risk tolerance and goals before investing and take expert advice.