Best SIP Mutual Funds

You can earn ₹2.5 lakh per month by investing just ₹10 lakh. As surprising as it sounds, it is indeed possible. The stock market and the power of compounding make this achievable.

There’s a hidden secret to achieving good financial returns in the future through long-term investments. Here’s how. For example, if you are 30 years old and make a one-time investment of ₹10 lakh this year. Even if this investment isn’t substantial, you could achieve an average annual return of 12 percent. Such returns are possible from equity mutual funds or a smart stock portfolio. In this scenario, this amount could grow to nearly ₹3 crore (₹2,99,59,922) in 30 years. This means, including your initial ₹10 lakh investment and interest, you could receive an average of ₹3 crore in 30 years. Now, if you retire with this amount and invest it in an SWP (Systematic Withdrawal Plan), you can withdraw a fixed amount each month. Additionally, the remaining funds will stay invested, and the interest on them will continue to grow.

How SWP Works

Suppose you invest ₹2.99 crore in an SWP and begin withdrawing money monthly for 15 years, or 180 months. You could then achieve an average monthly income of ₹2.5 lakh per year. If you invest the funds in a liquid fund and earn 7 percent interest, you would withdraw ₹4.5 crore over 15 years, and still have ₹28 lakh remaining, plus ₹1.88 crore in interest.

The Magic of Compounding

Compounding illustrates how beneficial it can be to start investing early and maintain it for a long time. Albert Einstein called compound interest the “eighth wonder of the world,” and this example proves it. The key is to invest in the right places and in the right way. Before investing in equity funds, you should carefully understand their history, performance, and risks. Also, it is important to review your portfolio periodically. It is true that inflation will increase in the future. Today’s ₹2.5 lakh won’t buy as much in 30 years. Nevertheless, it can certainly be beneficial for your retirement.