SIP of 5,000 rupees 15 years vs 5000 rupees 50 crore: How to create wealth with 12% annual rate of return
SIP returns with 12% annualized returns over different durations: Which SIP option would you choose? A systematic investment plan (SIP) allows investors to steadily guide their surplus cash in their shared selection plan. Its popularity stems from the fact that it does not force investors to arrange a large amount of cash pile immediately to start setting financial goals. This allows investors not only to commit to their long-term investment strategies, but also to maximize the benefits of compounding.
For unproven, complex investments multiplied over time, helping to create a lot of wealth over the years. Sometimes, compounding produces surprising results, especially over longer periods of time.
In this article, let’s compare three situations to understand the importance of time in recombination. Can you guess which SIP option is 12% at the expected annual tax rate: Rs 5,000, Rs 10,000 for 15 years, Rs 7.5 years, or Rs 15,000 for 5 years?
SIP Return Estimate | Which is best for you: 15 years monthly Rs 5,000, 10,000 rupees sip lasts 7. 5 years or 15,000 rupees sip lasts 5 years?
Plan 1: 5 years per month
Calculations show that at a 12% annual rate of return, a monthly increase of Rs 15,000 per month for 5 years (60 months) would result in a corpus of about Rs 12.37 lakh (total investment is Rs 9 lakh, with a return of about Rs 3.37 crore).
Plan 2: Rs 10,000 per month, lasting 7.5 years
Similarly, on the same expected rate of return, a monthly sip cost 7.5 years (90 months) of Rs 10,000 per month will accumulate wealth of about Rs 14.63 lakh, showing calculations (principal of Rs 9 lakh and expected Rs 5.63 lakh).
Also read: 7,000 rupees of electricity: How to generate a corpus of Rs 5 crore with an investment of Rs 7,000 per month?
Plan 3: Rs 5,000 per month for 15 years
A monthly leap rises to Rs 5,000 per month for 15 years (180 months), which will result in approximately Rs 25.23 lakh (principal of Rs 9 lakh and Rs 16.23 lakh).
Now, let’s look at these estimates in detail (numbers of Rs):
SIP estimated at 12% expected annual return | Scheme 1
| Year | invest | return | Corpus |
| 1 | 1,80,000 | 12,140 | 1,92,140 |
| 2 | 3,60,000 | 48,648 | 4,08,648 |
| 3 | 5,40,000 | 1,12,615 | 6,52,615 |
| 4 | 7,20,000 | 2,07,523 | 9,27,523 |
| 5 | 9,00,000 | 3,37,295 | 12,37,295 |
SIP estimated at 12% expected annual return | Scheme 2
| Year | invest | return | Corpus |
| 1 | 1,20,000 | 8,093 | 1,28,093 |
| 2 | 2,40,000 | 32,432 | 2,72,432 |
| 3 | 3,60,000 | 75,076 | 4,35,076 |
| 4 | 4,80,000 | 1,38,348 | 6,18,348 |
| 5 | 6,00,000 | 2,24,864 | 8,24,864 |
| 6 | 7,20,000 | 3,37,570 | 10,57,570 |
| 7 | 8,40,000 | 4,79,790 | 13,19,790 |
| 7.5 | 9,00,000 | 5,63,119 | 14,63,119 |
SIP estimated at 12% expected annual return | Scheme 3
| Year | invest | return | Corpus |
| 1 | 60,000 | 4,047 | 64,047 |
| 2 | 1,20,000 | 16,216 | 1,36,216 |
| 3 | 1,80,000 | 37,538 | 2,17,538 |
| 4 | 2,40,000 | 69,174 | 3,09,174 |
| 5 | 3,00,000 | 1,12,432 | 4,12,432 |
| 6 | 3,60,000 | 1,68,785 | 5,28,785 |
| 7 | 4,20,000 | 2,39,895 | 6,59,895 |
| 8 | 4,80,000 | 3,27,633 | 8,07,633 |
| 9 | 5,40,000 | 4,34,108 | 9,74,108 |
| 10 | 6,00,000 | 5,61,695 | 11,61,695 |
| 11 | 6,60,000 | 7,13,074 | 13,73,074 |
| 12 | 7,20,000 | 8,91,261 | 16,11,261 |
| 13 | 7,80,000 | 10,99,656 | 18,79,656 |
| 14 | 8,40,000 | 13,42,090 | 21,82,090 |
| 15 | 9,00,000 | 16,22,880 | 25,22,880 |
Also read: PPF’s regular income: How do you get tax-free income of Rs 60,000 from public provident fund?
sip&Composite|What is compound and how does it work in SIP?
In short, compounding in SIP means getting a “return rate”. The interest you earn will increase your investment, and so on.
Over a longer period of time, this combination has been growing in number, helping your funds reproduce faster.
This complex ability can lead to exponential growth, especially in a long-term diet. Read more about Compound Power
