Become a Millionaire with SIP of Rs.25,000, Know How?
Investing your money wisely is the key to growing your wealth. Perhaps one of the simplest means of achieving long-term financial success is by a Systematic Investment Plan (SIP), where you invest Rs.25,000 every month and let your money work for you over the long term. You might turn into a millionaire. This article describes how a disciplined approach to investing in a balanced portfolio can work for you in terms of gaining financial independence.
Where to Invest?
To create a diversified portfolio that balances stability and growth, it’s important to invest your Rs.25,000 SIP into three types of funds: Flexi-cap Funds, Mid-cap Funds, and Small-cap Funds. Here’s the percentage of money you would place in each:
- Flexi-cap Fund: 70% of your money.
- Mid-cap Fund: 20% of your money.
- Small-cap Fund: 10% of your money.
This allocation strategy is developed with a proper balance of risk and reward while maximising long-term returns.
Why a Flexi-Cap Fund?
Flexi-cap funds are known for their diversification and flexibility. They tend to invest in both large, mid, as well as small-cap stocks; this allows them to change direction according to changing market conditions. Large-cap stocks make up 55-80% of their portfolio, which is usually stable and less volatile, so flexi-cap funds are perfect for steady growth with low risk.
Flexi-cap funds, in the past, have proven pretty good. Over the 10 years up to December 12, 2024, flexi-cap funds grew by about 18% each year on average. In comparison, large-cap funds grew by around 13% per year during the same time.
Why Invest in Mid-Cap?
Mid-cap funds generally invest in companies that grow quickly. They can rise faster compared to large capital companies. Mid-cap investments are excellent for investors targeting higher returns, but sometimes, they are more volatile, showing bigger ups and downs.
Mid-cap funds have registered an average annual growth of 19% over the last 10 years till December 12, 2024. Though volatile in the short term, they can offer great long-term growth. It would be a good idea to invest only 20% of your money in mid-cap funds to handle the ups and downs but still benefit from their growth.
Why Invest in Small-Cap Funds?
Small-cap funds are the riskiest and potentially the most rewarding portion of your portfolio. They invest in small companies with tremendous growth potential but with huge potential price swings. Generally, small-cap funds are prone to delivering large returns over long periods of time but promise to deliver great short-term volatility.
Diversifying into the right amount of a small-cap fund along with the other stable variants, like flexi-cap and mid-cap funds, presents an attractive combination to earn rewards. A 10% allocation helps in managing risks with more significant possibilities for long-run reward potential.
The 70-20-10 strategy is a good balance of risk and reward for most people. It helps your investments do well in both good and bad markets. The flexi-cap funds give stability, the mid-cap funds help your money grow, and the small-cap funds offer big risks but also the chance for bigger rewards.
This balanced approach helps your investments stay strong during market ups and downs while setting them up for significant growth over time.
How Much Money Will Your Portfolio Make?
To help you understand how your investment might grow, here’s some past data on flexi-cap, mid-cap, and small-cap funds. Stick to a SIP of Rs.25,000 every month, and here’s how your corpus could grow:
- 5-year period: Rs.27 lakh.
- 10-year period: Rs.73 lakh.
- 15-year period: Rs.1.69 crore.
These numbers show how your money can grow over time through compounding. By investing regularly and for a long time, you can grow your money and build wealth.
Lower Risk with Time
The 70-20-10 investment plan has one of the main benefits: the longer you stay invested, the lower the chances of losing money. Here’s how the chances of making a profit improve over time:
- After 3 years: You will likely see positive returns in 92% of cases.
- After 5 years: The probability of profit-making is 99%.
- After 7 years: You are most likely to have profit (100% chance).
This means that with time, the chances of losing money reduce, and the possibility of profit increases, which is a very good investment for those seeking long-term wealth creation.
The Millionaire Plan: Keep It Simple
Investing doesn’t have to be complex; the 70-20-10 strategy is simple, effective, and easy to follow. This results in a diversified mix of flexi-cap, mid-cap, and small-cap funds leading to stable growth.
The success mantra is consistency. Invest only long-term money, which you don’t need in the short run, and, of course, stick to your SIP. Following this plan and being patient enough can make you a potential millionaire without the stress or complexity of the frequent trading and market timing techniques.
If you add Rs.25,000 every month, the time will come when your money will rise to a very high amount considering compounding. By following an easy 70-20-10 plan and staying long-term, you will always be on your way towards building wealth and achieving independence. Just stay patient and stick to the plan, as your money will grow.
