Do we need to do anything extra to get benefit of compounding? So I have a monthly SIP of Rs 5,000 for 10 years so do I have to do anything extra or after 10 years I'll get the benefits of compounding by default?
The power of compounding is considered the eighth wonder of the world. To get additional benefits you could step up or top up your SIP every year by a certain percentage, say 10%, or a certain amount ( whatever you are comfortable with).
Lets check with Example
If you do a monthly SIP of Rs 5,000 for 10 years, your corpus at the end of 10 years would be approximately Rs 10 lakh assuming a 10% CAGR.
If you do a monthly SIP of Rs 5,000 for 10 years and top it up by even a Rs.1,000 every year, your corpus at the end of 10 years would be approximately 17.5 lacs assuming a 10% CAGR.
This would give you a fair idea of the benefits that accrue along with the power of compounding just by stepping up your SIPs every year
This would give you a fair idea of the benefits that accrue along with the power of compounding just by stepping up your SIPs every year
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