70:15:15 Investment Formula: This investment strategy provides a simple and effective solution. Under this formula, monthly income is divided into three parts.
70:15:15 Investment Formula: Everyone wants to have enough money when he retires so that he can live the rest of his life happily. Saving for retirement has become challenging for many people in the rising inflation. Especially for those who do not earn much. But, it is not that it has become impossible to accumulate a huge fund for retirement. If you do the right financial management and adopt a good investment strategy, you can create a fund of crores of rupees for retirement despite having a low salary. One such great investment strategy to create a retirement fund is the 70:15:15 formula. This strategy ensures financial stability and future planning without affecting the current lifestyle.
This investment strategy provides a simple and effective solution. Under this formula, monthly income is divided into three parts. In this, 70% of the total income is kept for living expenses like rent, ration and bills. 15% is kept aside for emergency fund and 15% for investment in SIP. By following discipline and step-up SIP model, you can create a retirement fund of more than ₹ 10 crore even if you have a monthly income of 25 thousand rupees.
Step-up SIP is a game-changer
The step-up SIP model allows you to increase your investment amount every year, which is in sync with the salary increase. If you increase the SIP contribution by 10% every year for 25 years, the results can be amazing. The power of compounding is the main basis for the success of this strategy, where the value of the investment increases rapidly over time. Starting early increases the effect of compounding even more.
This is how a fund of 10 crores will be created
You start SIP with ₹ 3,750 per month. If you increase your investment by 10% every year and invest continuously for 25 years following this formula and you get an average annual return of 12%, then you will have ₹10.68 crores. In this, your total investment will be 2.95 crores and the return will be 7.73 crores. If you get a return of more than 12%, then there will be more money in your fund.
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