Looking to find where and how best to invest Rs 25000 per month? Or have already decided to invest 25000 per month in mutual fund SIP?
If yes, then please read on. This post will tell you how much wealth you can create if you stick with this SIP plan.
Investing Rs 25000 every month means different things to different people. For those with a salary of Rs 50,000, it means a lot. But for someone with Rs 3 lac monthly income, it’s next to nothing! In any case, investing in mutual fund SIP is a good decision and you will create a lot of wealth.
Why do I say so?
Because it’s well proven; I have benefited from it greatly myself and also because there are several real life proofs for this (like this one where one person used SIP to create a portfolio of multiple crores). You may accept or not, but the fact is that for many small investors, there are some obvious benefits of SIP investing.
SIP or Systematic Investment Plan is simple – Invest a fixed sum in mutual funds at a regular frequency (mostly monthly). Since most people are incapable of making big lump sum investments, SIP makes it easy for these people to make small and regular investments every month using their monthly salaries.
Now my guess is that your main concern would be to know how much money you will have when you invest Rs 25000 a month in mutual funds for several years?
So let’s do some basic calculations:
Value of Rs 25000 per month SIP
If you check the historical SIP returns of good mutual funds, you will find that many have given average returns in excess of 15%. In fact, in many cases, it’s possible to find mutual funds giving returns higher than even 18% when periods of around 5 years are considered. But let’s be conservative and assume that the average SIP returns in 10, 15 or 20 years will be about 12% per annum.
Here is what a Rs 25000 monthly in a Systematic Investment Plan can do over the years:
- 5 year SIP of Rs 25000 monthly = Rs 21 lakh
- 10 year SIP of Rs 25000 monthly = Rs 59 lakh
- 15 year SIP of Rs 25000 monthly = Rs 1.25 crore
- 20 year SIP of Rs 25000 monthly = Rs 2.4 crore
- 25 year SIP of Rs 25000 monthly = Rs 4.5 crore
- 30 year SIP of Rs 25000 monthly = Rs 8.1 crore
Those are some big numbers…atleast towards the end. And the picture becomes clearer when these figures are compared with the actual investments made:
- 5 year = Rs 25,000 x 12 x 5 = Rs 15 lakh
- 10 year = Rs 25,000 x 12 x 10 = Rs 30 lakh
- 15 year = Rs 25,000 x 12 x 15 = Rs 45 lakh
- 20 year = Rs 25,000 x 12 x 20 = Rs 60 lakh
- 25 year = Rs 25,000 x 12 x 25 = Rs 75 lakh
- 30 year = Rs 25,000 x 12 x 30 = Rs 90 lakh
Stunning! Isn’t it?
And notice that in just 10 years, your actual investment of Rs 30 lakh turns into Rs 59-60 lakh. It doubles over a period of 10 years!
The route of SIP investing can create a lot of wealth for you. More so, if you start early on.
So if you start investing early (let’s say at age 25-30) and continue till 60, your monthly investments of Rs 25,000 in equity funds can grow into Rs 8.1 crore in 30 years! This is the magic of compounding.
Compared with other options like fixed deposits, PF, etc. (where you won’t get more than 7-8% returns), equity funds offer 12-15% average annual returns in the long term.
And starting early is unimaginably important. Here is a detailed post that I did to highlight the huge cost of delay in investing. It’s about two friends who start investing at different ages of 25 and 35. You will be shocked to see the difference in the final corpus they create. Do read it!
Real Example – SIP of Rs 25000 in Good Mutual Funds
The calculations above were done using simple SIP calculator based on the assumption that average SIP returns are fixed at 12%. But in reality, neither stock markets nor mutual fund NAVs move in straight lines. The returns fluctuate and don’t follow straight lines.
So here are some real life SIP examples that show how much you would have if you started investing Rs 25,000 a month via SIP in good funds some years back:
Note – The choice of fund(s) or fund house is just for sharing the concept. It should not be construed as an investment recommendation.
Starting January 2000, if you had invested Rs 25,000 per month in HDFC Top 200, HDFC Equity and HDFC Prudence, your actual total investment in each would have been about Rs 52.7 lac (up to July 2017).
And the value of your investments would be…
….hold your breath….
- Rs 4.36 crore in HDFC Top 200 Fund
- Rs 4.66 crore in HDFC Equity Fund
- Rs 4.07 crore in HDFC Prudence Fund
Read those figures again. 🙂
These have been achieved in little over 17 years!
We often think it’s difficult to get rich. But the above examples prove otherwise.
Investing in mutual fund SIPs can make you a SIP crorepati even with a normal income. We are discussing investing Rs 25,000 a month. But you can become a crorepati even if you don’t invest that much. So how to get Rs 1 crore in 15 years? The answer is to just invest Rs 20000 every month. Can’t invest that much? No worries. If you can invest just Rs 10000 per month, you can still get to Rs 1 crore in 20 years. Not bad!
So now you have the answer to your question of how to become crorepati by SIP?:-)
Don’t you feel something is odd in this discussion till now?
There is. And let me highlight it for you –
There is absolutely no need to keep investing just the originally decided amount of Rs 25000 per month for 20-30 years. Your income would increase every year. So your investments should increase too. Isn’t it?
Now Rs 25000 per month investment for 17 years resulted in Rs 4-4.4 crore. Just imagine what would have happened if you had decided to go for a Step Up SIP? An SIP that increases every year in line with your income. So for example, it can be Rs 25000 in the first year, followed by SIP of 30,000 per month in next year, SIP of 35,000 per month in 3rd year and so on…. (i.e., increasing SIP by Rs 5000 every year).
So if you are planning to start a SIP, just remember that you can create ‘more’ wealth if you are able to increase the SIP amount every year.
Now ofcourse I have chosen funds that help me prove my point. And there would be several other bad funds too where a systematic investment strategy would have resulted in much lower SIP returns.
But I am trying to highlight the potential of serious wealth creation here. And if you believe in the power of equity, then for most common people, the best way to invest regularly in equity is to do via mutual fund SIPs.
Model SIP Mutual Fund Portfolio
If you wish to create a portfolio of mutual funds by doing a SIP of 25000 per month, it’s suggested not to have too many funds. Going for just 3-5 funds is more than enough.
Depending on one’s risk profile, some possible combinations are:
- Rs 10000 each in two Large Cap funds + Rs 5000 Balanced fund
- Rs 10000 Balanced fund + Rs 7500 Large cap fund + Rs 7500 Small&Mid cap fund
- Rs 5000 Large Cap Fund + Rs 10000 Balanced fund + Rs 5000 each in two Small&Mid cap funds
- Rs 7500 each in two Large Cap funds + Rs 10000 Mid&Small Cap fund
- Rs 5000 in Large Cap Fund + + Rs 10000 Small&Mid cap fund + Rs 10000 in Flexi/Multi Cap Fund
- Rs 10000 Large Cap fund + Rs 5000 Balanced fund + Rs 5000 Mid&Small Cap fund
- Rs 10000 Balanced fund + Rs 10000 Mid&Small Cap fund + Rs 5000 Large cap fund
- Rs 15000 Index Fund + Rs 10000 Balanced fund
There can be an infinite number of combinations.
Suitability of SIP portfolio will differ from one investor to other. If you are not sure about where to invest or looking for the best SIP for Rs 20000 per month, it’s better to take help of an investment advisor (you can talk to me too).
Note – It’s assumed that if investing Rs 25000 in equity funds, you have already taken care of debt investments (via PF, PPF, debt funds, etc.) in accordance with your asset allocation based investment plan. It is also assumed that you wish to invest for at least 5 years. Anything lower (like 2-3 years) and you should go for debt options or have a very small percentage in equities.
SIPs are really helpful when it comes to investing in equity without much effort or stress. But SIPs can be helpful when it comes to goal based investing too. I have already written at length as to how setting goals can help better manage investments.
In fact, it’s the basis of how the remarkably useful and powerful goal based financial planning works. You can easily use SIPs to plan for all your goals (download free financial goal worksheet here) and then invest regularly to achieve them.
Goals like saving for children’s education, children’s marriage, saving for your house purchase, foreign trips, etc. can be done easily and efficiently through systematic investment plans of mutual funds.
And why leave the biggest goal of them all?
You can even do critical retirement planning or early retirement planning using mutual funds.
In addition to the mandatory savings you do for your retirement (via EPF or PPF), you can use SIPs to create a good retirement mutual fund portfolio too. Investing in mutual funds for retirement is a no-brainer if you don’t want to run out of money before you die.
As a professional investment advisor, I do help investors create goal-based financial plans to achieve their real financial goals. If you wish to get yourself a solid financial plan that tells you how much to invest, where to invest and for how long to invest for your financial goals, you can contact me for professional advice.
Here is how to contact me:
- Go through the Services Page to see how I create your financial plan and use the form (at the end of the page) to contact me
- Contact Me Directly using this form
As you must have realized by now, just knowing where to invest Rs 25000 every month is not enough to live a financially fulfilling life that takes care of all your financial goals. It is far more important to know how much to invest in SIP to achieve each of your financial goals.
I will end this post now. But before I do, let me tell you something important:
SIP is no magic that will solve all your financial worries. Also, it does not guarantee high positive returns. But in order to earn high returns offered by equity and that too on a limited monthly income that most people have, taking the SIP route is the best bet.
And please, don’t be under the impression that SIP is only for small investors. You can invest much more than just doing a SIP of 25000 per month. 🙂 You can go for (click links below for details):
Or if you want to know how much wealth you can create by investing lesser amounts, then use below links:
- SIP of Rs 5000 per month in mutual funds, or
- SIP of Rs 10000 per month in mutual funds, or
- SIP of Rs 15000 per month in mutual funds, or
- SIP of Rs 20000 per month in mutual funds
By investing regularly via SIP in best mutual funds for long term SIP investment, you can create a solid portfolio that earns inflation-beating returns without any hassles.
So if you are still thinking whether or not to start a SIP in equity mutual funds, I would suggest you stop thinking and start acting now. You have all the answers now and don’t need to wonder what would happen if I invest 25000 a month in mutual funds. You know exactly how much wealth your small regular systematic investments can create.
So start investing if you still haven’t, or increase your SIP investments if you are already investing 25000 monthly in mutual fund SIP in 2023. Over long term, you will do incredibly well.