There cannot be any better way to make wealth than through mutual fund through SIP. With an investment of ₹6,000 per month, the parents get an opportunity to accumulate more than ₹1 crore Corpus for their child 23 Years.
SIP Overview and Why It Is Important
Systematic Investment Plan means that you invest a fixed amount weekly or monthly in a mutual fund scheme which encourages disciplined savings besides allowing the magic of compounding to work. This approach is well suitable when the target is to make a long-term, for example, to finance a child’s education or future.
The Path to ₹1 Crore
Now taking the assumption, if an investor invest ₹6,000 per month, the investment shall prove huge with a compounded return rate of 12% per annum. Using the SIP formula:
M = P × n × [{(1 + i)n – 1} / i] × (1 + i)
Where:
M = Maturity amount
P = Investment made every month (₹6000)
i = Monthly interest rate (12%/12 = 1% or 0.01)
n = Total number of months considered i.e 288 (24 years of age × 12 months = 288)
Plugging in the values:
M = 6,000 × ({(1.01)^288 – 1} / 0.01) × (1 + 0.01)
Total , maturity amount comes to around ₹ 1.02 crore.
Key Benefits of Starting Early
Starting SIPs at an early age in a child’s life also helps in creating a good compounding effect where returns start earning returns in the future. This weakens the financial responsibility required by the parents but stretches the investment required to accomplish such aims over a longer period.
Considerations for Investors
The returns of the SIPs invested in equity-oriented mutual funds have been good in the past it is important to remember that these are not without risks. Investors should:
Assess Risk Tolerance: Match the risk parameters of the investment to the personal goals of the individual his/her specific needs.
Diversify Investments: Invest in the combination of equity and debt funds to enhance probable returns and volatility levels.
Consult Financial Advisors: To avoid heartaches and losing money consult an expert who may advice one depending on one’s requirement.
Conclusion
SIPs being disciplined mode of investment can play huge role in funding the child expenses in future. Durant ₹6,000 per month, the parents can definitely have over ₹1 crore saving when the child is 24 years old, which would help to fund his or her dreams.