How to become a crorepati by saving ₹5,000 every month:Learn the right way to invest; 10 expert tips

Do you know that saving the cost of one daily coffee or tea can make you a crorepati? Most people think that to become rich, you need a salary in lakhs or a big business, but by doing SIP (Systematic Investment Plan), you can become a crorepati even with small savings. Lets see how? Question- What is SIP? How is investment done in it? Answer- SIP is a disciplined way of investing in mutual funds. Understand the complete answer through pointers- Question- How does compounding work in SIP? Answer- Compounding means ‘earning interest on interest’. When someone does SIP, the return (profit) received on the principal investment is not withdrawn but gets reinvested. Then in the next month, returns are earned on both the principal investment and the previous profit combined. This is called the Snowball Effect. Just like a snowball rolling down gathers more snow with it and the ball keeps getting bigger. Similarly, as the SIP investment duration increases, the amount keeps growing larger. Understand the compounding effect on a monthly investment of 5 thousand through graphics- You will notice that between 20 to 30 years (in the last 10 years), the fund jumped directly from ₹50 lakh to ₹1.76 crore. This is the real power of compounding. Question- Is it really possible to build a fund of ₹1 crore through SIP? Answer- Yes, it is absolutely possible. Understand through pointers- Question- How much time will it take to build a fund of ₹1 crore and how much money will need to be invested every month? Answer- This completely depends on monthly savings and annual return (CAGR). An average return of 12% in equity mutual funds is considered a standard benchmark. See the calculation based on 12% annual return in the graphic- Question- How to start building a future fund of ₹1 crore? Answer- This depends on how much time you have left for investment. Based on 12% annual return- How to start? Question- If the returns (like 10%, 12%, 15%) change, how much difference will it make to the target of ₹1 crore? Answer- Even a small change in the rate of return has a big impact on the fund. This is called the compounding effect. For example, if you do a monthly SIP of 10,000 rupees for 20 years, the results will be something like this- Question- What is the benefit of starting SIP early? Answer- Its biggest advantage is the ‘power of compounding’. Time plays a key role in growing your capital. Question- If you increase SIP investment every year when salary increases, how quickly will the fund build up? Answer- This is called Step-up SIP. By increasing your investment along with your income, you can achieve your goals much earlier. Question- If you receive a lump sum amount from somewhere, should you invest it in SIP as well? Answer- If you receive a lump sum amount as bonus or inheritance, it is wise to use STP (Systematic Transfer Plan) instead of investing it directly. Question- What things are important to keep in mind while doing SIP? Answer- The success of SIP lies not only in investing, but in adopting the right strategy. See all the important points in the graphic- Question- What risks should be kept in mind during investment? Answer- Mutual fund investments are not completely risk-free. It is important to understand these risks before investing- There is a saying in the financial market, the best time was yesterday, and the second best time is ‘today’. Therefore, start investing now.