Many people dream of becoming financially independent but don’t know where to start. If you believe becoming a millionaire is out of reach, think again. With consistent savings and a disciplined investment strategy like the 12x12x24 formula of SIP (Systematic Investment Plan), this dream is achievable.
What is SIP, and how does it work?
SIP, or Systematic Investment Plan, is a popular way to invest in mutual funds. Instead of a lump sum, SIP allows you to invest small amounts regularly—monthly or quarterly—into mutual funds. These investments grow over time through the power of compounding, where the returns earned also generate more returns.
With SIP, your money is managed by professionals who invest in stocks, bonds, and other assets to maximize returns. Historically, mutual funds via SIP have provided returns of around 12%-15% annually, which is much higher than traditional savings options like fixed deposits or government schemes.
What is the 12x12x24 formula?
The 12x12x24 formula is a simple investment strategy designed for young earners. Here’s how it works:
- Start early: Assume you begin investing at the age of 24 years.
- Invest consistently: Deposit Rs 12,000 per month into a SIP for 24 years.
- Earn steady returns: With an average annual return of 12%, your money grows exponentially.
This disciplined approach ensures you accumulate a significant corpus by the time you’re 48, making early retirement or financial independence a real possibility.
Breakdown of returns using 12x12x24
Here’s how the numbers work out:
- Total investment: Rs 12,000/month for 24 years equals Rs 34.56 lakh.
- Returns at 12% annual growth: Approximately Rs 1.66 crore.
- Final corpus: Your investment and returns together amount to over Rs 2 crore.
This wealth is achievable by simply following the formula and staying consistent with your investments.
Benefits of starting SIP early
- Power of compounding: Starting early gives your money more time to grow, compounding your returns exponentially.
- Disciplined savings: Monthly SIPs ensure you save regularly, helping you build wealth systematically.
- Beating inflation: Mutual fund returns often outpace inflation, preserving the value of your savings.
- Financial freedom at 48: With Rs 2 crore, you can plan for early retirement or invest further to multiply your wealth.
Why choose mutual funds for long-term goals?
Mutual funds pool money from multiple investors and invest in a diversified portfolio of stocks and bonds. This reduces risk while maximizing returns, especially when invested for the long term through SIP.
Professional fund managers handle these investments, ensuring the best possible outcomes. SIPs also eliminate the stress of market timing, as you invest consistently regardless of market fluctuations.
Who should use the 12x12x24 formula?
- Young earners: Starting early, especially in your 20s, allows you to accumulate a significant corpus by the time you’re in your 40s.
- Consistent savers: If you can commit to regular monthly savings, this formula is ideal.
- Goal-oriented investors: Use this formula to achieve long-term financial goals like retirement, education, or buying property.
Key tips for successful SIP investing
- Start as early as possible: The earlier you begin, the more your money grows.
- Stay consistent: Avoid skipping SIP payments, even during tough financial times.
- Choose the right fund: Consult financial advisors to pick mutual funds that match your risk profile and goals.
- Focus on the long term: SIPs work best when you stay invested for at least 10-15 years.
- Review performance regularly: Monitor your mutual fund’s performance and make changes if necessary.
Final thoughts on 12x12x24 SIP strategy
The 12x12x24 formula shows how disciplined investing can turn small savings into substantial wealth. By starting early, staying consistent, and leveraging the power of compounding, you can build a secure financial future and achieve your dreams of financial freedom.
