How much SIP is needed to build Rs 1 crore? Here’s what you should know

Building a corpus of Rs 1 crore through Systematic Investment Plans (SIPs) is one of the most commonly searched questions in personal finance today. Here's how much you need to save and invest through SIPs to reach that Rs 1 crore mark.

SIPs are a tool for wealth creation, particularly in a rapidly growing economy like India. While the world faces economic slowdowns, India’s GDP continues to surge, making it an ideal time for investors to consider disciplined savings.

How much should your SIP be?

There are two ways to determine your ideal SIP amount:

Based on your current savings capacity

If you can only spare Rs 2,500 per month, investing this amount for 20 years with an expected return of 12 per cent per annum could grow your investment to approximately Rs 25 lakh. However, if this doesn’t meet your financial goal, a different approach may be needed.

Goal-based planning

If your target is to accumulate Rs 1 crore in the next 20 years with the same 12 per cent expected return, you’ll need to invest around Rs 10,000 per month in SIPs. While the first approach offers more flexibility, the second requires disciplined savings, ensuring you stick to your target amount every month.

Accounting for inflation

However, simply following these approaches may not be enough. The impact of inflation must be considered, as it can significantly erode your returns. For instance, even if you accumulate Rs 1 crore after 20 years, an inflation rate of 6 per cent would reduce its purchasing power to just Rs 32 lakh in today’s terms.

The solution: Step-Up SIPs

One way to combat inflation and ensure your investment retains its value is by opting for a Step-Up SIP. In this approach, you increase your SIP contribution annually by a fixed percentage, say 10 per cent. For example, if you start with Rs 10,000 in the first year, your SIP would rise to Rs 11,000 in the second year, Rs 12,100 in the third year, and so on. Over 20 years, this gradual increase can make a significant difference, helping you achieve your Rs 1 crore goal while staying ahead of inflation.

Plan for realistic financial goals

Relying solely on standard SIP projections may not always be the best approach for long-term financial goals. A Step-Up SIP can help ensure that your investments grow at a rate that outpaces inflation, allowing you to build the wealth you need.