An investment of Rs 2,000 pm would have made Rs 3 lakh in eight years

If you had invested Rs 2,000 every month then by now your worth of investment would have been approximately Rs 3,80,000.

An individual can create huge wealth by investing via a Systematic Investment Plan (SIP). Mutual fund offers an investor two investment options such as SIP and Lump sum. SIP option is feasible to all types of individuals whether they have low income, moderate-income or high income as it can be started as low as Rs 100 or Rs 500 which vary according to the mutual funds. SIP aids an individual to make the habit of investing regularly.

Mutual funds offer various types of schemes such as debt-oriented schemes, equity-oriented schemes, hybrid schemes and other schemes which are divided into various categories. One of the prime benefits of investing via SIP is rupee cost averaging. Investors, who are at an early stage of earning, have a high-risk capacity as compared to mid-earning or pre-retirement and retirement stage investors. So, investors with high-risk capacity can invest the amount in equity-related schemes in their early stage and further, can shift some proportion to debt once they get decent returns from the equity markets.

Let’s look at an example:

If you had invested just Rs 2000 per month in any large-cap fund, for instance, Nippon India Large Cap Fund from the year 2013 till date, then what will be your worth of investment as of now?

 
Details:

Start date of investment: October 1, 2013

Worth of investment as of: October 1, 2021

Rate of return on SIP: 15.57% 

Term of investment: 8 years i.e., 96 months.

Per month SIP investment amount: Rs 2,000

Worth of investment as of October 1, 2021:  FV(15.57%/12,8*12,-2000,0,1) = 3,82,058

As you can see in the above calculation, the worth of investment will be Rs 3,82,058. So, you can create wealth by just investing Rs 2,000 every month. In all, invested amount is Rs 1,92,000 in 8 years, which is increased to Rs 3,82,058. As and when your earnings increase, you can increase your SIP amount from Rs 2,000 to Rs 3,000 or Rs 5,000 with whichever amount you are comfortable with. 

Investing an amount for a longer period helps investors to reap maximum returns as compounding is a boon in the longer term.