Turning 25 in 2025? Here’s How You Can Build A Corpus Of Over Rs 20 Crore with SIP

Can you build a retirement corpus of over Rs 20 crore by starting a SIP investment early in your career? This could seem like a far-fetched dream to many middle-class Indians, but here’s the thing - it is achievable. This would require discipline, consistency, and a plan that starts early.

The idea of a Systematic Investment Plan (SIP) is based on the principle of compounding. In investments, the power of compounding is referred to as the act of adding “interest on interest”. Here, you generate earnings on both the principal amount and the interest that has already accumulated over time.

Let’s understand, step by step, with real numbers how you can start with a SIP plan to build a corpus of over Rs 20 crore.

Suppose you are 25 years old, fresh into your career, and earning a monthly salary of Rs 50,000. You have decided to save up to 30 per cent of your income, i.e. roughly Rs 15,000 per month. This may seem like a sacrifice but such a decision could completely transform your financial life by the time you retire at 60.

Now, you plan to invest this amount systematically through a monthly SIP. The catch with investments is that as your salary grows, so should your investments. In this case, with an increment in your salary, you increase your SIP amount by 10 per cent every year. Assuming a 12 per cent annual return (CAGR) on your investments, an average figure based on historical equity market performance, let’s see how this journey unfolds.

Year-by-year breakdown

First Year: You start with a basic monthly SIP of Rs 15,000 and by the end of the first year, your total contribution will be Rs 1,80,000. With the effect of compounding, your portfolio will grow to around Rs 1,91,567.

10th Year: Almost a decade into your investment, your monthly SIPs have grown to Rs 38,906 (because of an annual 10 per cent step-up). Your total contributions so far will amount to approximately Rs 22.8 lakh. With the power of compounding your portfolio will now stand at Rs 64.4 lakh.

The key is to keep a disciplined approach towards your investments.

20th Year: With two decades in your SIP investments, the monthly contribution now stands at (around) Rs 101,000 lakh. The total amount you have contributed over two decades is about Rs 1.7 crore and your portfolio? It has accumulated around Rs 6.6 crore. The returns at this point outweigh the contributions.

30th Year: The monthly contribution by the 30th year of your investment journey will reach around Rs 262,000 lakh. The portfolio in this case would have grown to an impressive Rs 22.9 crore with the power of compounding.

35th Year: At this stage, you will be 60 and your monthly SIPs will amount to over Rs 4 lakh. Over the last 35 years, you would have contributed around Rs 7.3 crore in total. Your portfolio by this stage will generate a return of around Rs 20.4 crore.

With a disciplined approach coupled with incremental contributions and equity returns, you will reach your desired target.

Factor Inflation

Do not forget to factor in the devil that casts its evil eye on your returns; Inflation. Investing without factoring in inflation for your desired corpus can bring in huge disappointments. For instance, with a 6 per cent average inflation rate, this corpus will be worth roughly Rs 3.5 crore in today’s terms.

However, with a gradual 10 per cent increase in your monthly contribution, you reach a desired corpus that still weighs more than nothing.

Here are key takeaways to keep in mind

1) Start Early: Time is the biggest ally when it comes to building wealth. Starting in your 20s gives you an edge to compound your investments over decades and see how it maximizes your returns.

2) Increasing Contributions: A 10 per cent annual increase in SIP amount will align your savings with your growing income and ensure your investments keep up with the inflation.

3) Consistency is Key: Market volatility may jump-scare you often into doubting the return on your investments. However, it is important to remember that you are investing for the long term and not the short period. Sticking to your SIPs ensures that you get the benefit from ‘rupee cost averaging’ wherein fund managers buy more units when prices are low and fewer when they are high.

4) Set Realistic Expectations: The historical performance of equity markets vouches for an average 12 per cent CAGR, but it is only achievable when one sticks to the investment cycle without chasing overnight gains.

Above everything else, keep in mind that the stock market does not have a fixed rate of return and it is not possible, for an absolute value, to predict the rate of return.