Start at 25: How Much SIP Is Needed to Become a Millionaire by 40?
SIP: Turning 25 is a crucial milestone, as it often marks the beginning of a steady income, yet long-term financial planning is frequently delayed. With a bit of financial discipline at this stage, however, you can secure your future and eliminate money worries by the time you turn 40. If you’re 25 and aspire to become a millionaire by 40, this goal is entirely achievable. Here’s a simple explanation of how investing through a Systematic Investment Plan (SIP) can help you build a corpus of ₹1 crore in 15 years.
Why is SIP the best method?
In SIP, a fixed amount is invested in mutual funds every month. The biggest advantage of this is that the magic of compounding works here. The sooner you start investing, the more benefit you will get. 25 years of age is considered the best time to start investing.
The math behind starting an SIP at age 25:
Let’s say a person starts an SIP of Rs 22,000 every month at the age of 25. If they get an average annual return of 12% and continue it for 15 years, the figures will be something like this:
Total investment amount: Rs 39,60,000
Estimated return: Rs 65,10,491
Total fund value: Rs 1,04,70,491
This means that by investing just Rs 39.6 lakh, you can build a fund of more than Rs 1 crore by the age of 40.
Understand the power of compounding here:
In this entire investment, the most important role is played not by the return, but by time. In the initial years, the fund grows slowly, but as time passes, you start getting returns on the returns as well. This is why the fund appears to grow rapidly after the 10th year.
Is a Rs 22,000 SIP necessary for everyone?
Not necessarily. If you start with a lower SIP amount, you will either have to increase the investment period or gradually increase the SIP amount. Many investors can also reach this goal by adopting a 10% SIP step-up every year.
