SIP Special Rule for Double Your Wealth : The market is very volatile right now. It has fallen by about 10 thousand points from its peak in September 2024. But even in this volatile market, SIP is an effective way to invest and if investors choose the method of systematic investment plan with some wisdom, then in the coming days they can get the true benefit of the power of compounding. The 8-4-3 SIP formula is a strategy for consistent long-term growth, through which investors can grow their wealth rapidly. So you should know how the 8-4-3-2 formula of SIP works.
8-4-3-2 rule in compounding
You can understand the 8-4-3-2 rule of compounding to grow your money faster. According to this rule, if you do SIP of Rs 10 thousand every month and your scheme gives returns of 12 percent per annum, then in the first 8 years your wealth will increase to Rs 16 lakh. And in just the next 4 years your wealth will increase from Rs 16 lakh to Rs 32 lakh. After this, it will take only 3 years to go from 32 lakh to 50 lakh and 2 years to go from 50 to 66 lakh. That means it took 8 years to raise the first Rs 16 lakh, 4 years to raise the next Rs 16 lakh, then 3 years to raise the next Rs 16 lakh and only 2 years to raise the next Rs 16 lakh.
Investment from 1 to 8 years
Monthly SIP amount: Rs 10,000
Total investment period: 8 years
Total SIP amount in 8 years: Rs 9,60,000
Total value of SIP after 8 years: Rs 16,15,265.65 (Rs 16.15 lakh)
Investment from 1 to 12 years
Monthly SIP amount: Rs 10,000
Total investment period: 12 years
Total SIP amount in 12 years: Rs 14,40,000
Total value of SIP after 12 years: Rs 32,22,521.75 (Rs 32.23 lakh)
Investment from 1 to 15 years
Monthly SIP amount: Rs 10,000
Total investment period: 15 years
Total SIP amount in 15 years: Rs 18,00,000
Total value of SIP after 15 years: Rs 50,45,760 (Rs 50.46 lakh)
Investment from 1 to 17 years
Monthly SIP amount: Rs 10,000
Total investment period: 17 years
Total SIP amount in 17 years: Rs 20,40,000
Total value of SIP after 17 years: Rs 66,79,208.29 (Rs 66.79 lakh)
what result did you get
It is clear here that if Rs 16 lakh is invested for 1 to 8 years, then the corpus increases by next Rs 16 lakh in 4 years and then the next Rs 16 lakh increases in 3 years. If you maintain your investment even after 15 years, the real magic of compounding will be visible. Now if you continue investing in the same scheme as before, it will take only 2 years to raise the next Rs 16 lakh.
Owner of 2 crores in 25 years
It is clear from the calculation that the benefit of compounding is available only in long term investment. If you maintain your investment for 25 years following this rule, you will get a ready fund of Rs 2 crore. In which you will have to invest Rs 10,000 every month in a scheme where the annualized return is 12 percent.
Understand compounding correctly
When you invest your money, the return or interest on it can be calculated in two ways. First, simple interest or returns, in which interest is added on the money you deposit. Second, compound interest, in which the return on the original amount deposited by you along with the interest earned on it is also added. For example, if you have invested Rs 1 lakh and the interest received on it after one year is Rs 10 thousand. So if interest is added to the principal amount then this amount becomes Rs 1,10,000. Now the next interest will be added on Rs 1,10,000. This process will continue further.
(Source : FundsIndia, SIP Calculator, Financial Website)
