228499 SIP myths you must know!

Pradeep Kumar is a 23-year-old IT consultant who earns Rs 50,000 per month and wants to start investing to achieve his financial goals.

“I want to start investing early so that I have sufficient corpus for my retirement. I want to achieve my goal of having a corpus of Rs 1 crore soon,” he says.

With the new generation being more ambitious and financially aware, it is no more a distant dream to think about accumulating a corpus of Rs 1 crore in a defined time period.

Here, we have worked out the numbers to show you the power of compounding and how it will help you achieve your goal using the Public Provident Fund (PPF) route.

Long-term investment plan

The PPF is also a tax-free tool. But as all there is a catch, you cannot invest more than Rs 1,50,000 in PPF in a year. PPF is a long-term investment plan. It is a low risk but guaranteed reward tool in investment planning.

PPF was introduced by the National Savings Institute of the Ministry of Finance in 1968. Currently, the PPF interest rate is 7.1% and a lock-in of 15 years but you can extend the tenure in the multiples of 5 years.

Now, let’s talk numbers

The following table shows how much an individual has to invest per month to reach the Rs 1-crore mark.

The earlier you start investing, the faster you would be able to reap benefits of compounding.

If Pradeep wants to be a crorepati as soon as possible using PPF, then he would have to save Rs 12,500 every month, which is exactly 25% of his salary. Then, he would be able to achieve the Rs 1 crore goal in 25 years.