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New Delhi. In today’s time, it has become a very easy and effective way to create a big fund by depositing small amounts in mutual funds through Systematic Investment Plan. If an investor starts an SIP of just ₹500 every month and gets an average annual return of 12%, then this small amount can turn into around ₹50 lakh in the long run. Time and compounding play the biggest role in this entire process, which gradually helps in increasing the investment manifold.

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How to make ₹50 lakh?

In fact, a SIP of ₹500 every month amounts to ₹6,000 in a year and the total investment in 40 years is around ₹2.4 lakh.

Monthly investment – ​​₹500
Annual investment – ​​₹6,000
Total duration – about 40 years

In this way your total investment in 40 years will be –

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₹500 × 12 × 40 = ₹2.4 lakh
With 12% return, you will get a total of ₹ 48,96,536 lakh.

Also, due to compounding, the returns on it increase very rapidly. This means that if you invest only ₹ 2.4 lakh in 40 years, then at 12% annual return you can get around ₹ 48–49 lakh. Its most important thing is that the growth remains slow in the initial years, but as time progresses, the returns also start increasing rapidly and the maximum rise is seen in the fund in the last years.

How does compounding work?

It is important for you to understand that such a big goal cannot be achieved in a short time. If the investment period is kept only for 20 to 25 years, then the fund will also be quite small. In this way, to build a finance of ₹50 lakh, investments will have to be made continuously for 35 to 40 years. Due to this, experts advise to start investing early, so that a big fund can be created with a minimum amount.

advantage of starting early

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If you start SIP at the age of 20 to 25 years:

A big fund can be created even with less money.
The burden of investment is reduced.
Retirement or big goals are easily accomplished.

Benefits of Step-Up SIP

If investors want to reach this goal quickly, they will have to increase their SIP amount. Apart from this, the option of Step-Up SIP should be adopted, in which your investment amount is increased little by little every year. If seen, to make ₹ 50 lakh from SIP of ₹ 500, patience, discipline and long time are necessary. SIP is not a shortcut, but an authentic process to build wealth gradually.