First Step of Financial Planning - How to save 20% of your monthly income

Here's an example calculation of a *Systematic Investment Plan (SIP)* in the *Nifty 50 index* with a monthly investment of ₹10,000, ₹20,000, and ₹50,000 over 24 years, starting from 2000. The approximate returns for long-term investments in Nifty 50 have historically been around **12% to 15% annualized**. For this example, I'll use a **12% annualized return**.

SIP Calculation Assumptions:
- Monthly SIP amount: ₹10,000, ₹20,000, and ₹50,000
- Investment period: 24 years (288 months)
- Expected annual return: 12% (compounded monthly)
- Investment starts in 2000

Let's calculate the future value (FV) using the SIP formula:

\[
FV = P \times \frac{(1 + r)^n - 1}{r} \times (1 + r)
\]

Where:
- *P* = SIP amount (₹10,000, ₹20,000, ₹50,000)
- *r* = Monthly rate of interest = 12% annually = 1% monthly = 0.01
- *n* = Number of months = 24 years × 12 = 288 months

Results:

1. **SIP of ₹10,000 per month**:
- **Total Investment**: ₹28,80,000 (₹10,000 × 288 months)
- **Future Value**: ₹3,38,30,060 (approximately ₹3.38 crores)

2. **SIP of ₹20,000 per month**:
- **Total Investment**: ₹57,60,000 (₹20,000 × 288 months)
- **Future Value**: ₹6,76,60,120 (approximately ₹6.77 crores)

3. **SIP of ₹50,000 per month**:
- **Total Investment**: ₹1,44,00,000 (₹50,000 × 288 months)
- **Future Value**: ₹16,91,50,300 (approximately ₹16.92 crores)

Key Points:
- These calculations assume a constant 12% return, which is a rough historical average. Actual returns could vary based on market conditions.
- The compounding effect makes a significant difference in the final corpus, especially over long periods.
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