The Systematic Investment Plan (SIP) is a way of investing a fixed amount at regular intervals in a mutual fund. Through SIPs, you can purchase units of a mutual fund for the specified amount on a given date each month.

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Long-term monthly investments in SIPs can do the trick with the power of compounding, and can help generate good returns.

For people looking to build a retirement corpus, SIPs can be an efficient tool, experts say.

However, one should have the risk appetite and start planning early.

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"The good thing about planning early is that you can achieve any long-term goal by sacrificing little or by making little effort," said Vijay Singhania, Chairman at TradeSmart while talking to CNBC-TV18.com.

For retirement, each person will have a different amount they need. For ease of understanding, let's take the crorepati figure. How much will it take to have Rs 1 crore at retirement?

The amount needed to invest here will depend on two things — the time when you start investing and the instrument you invest in, Singhania told CNBC-TV18.

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"Again if we shall make an assumption that a 25-year-old decides to plan his/her retirement and invests in equity linked SIP, which at a conservative rate yields 12 percent per annum, then compound interest calculations show that the youngster would need to save only Rs 2,000 per month for the next 35 years. The investment would result in a final retirement amount of Rs 1.05 crore," he added.

According to Groww calculator, a person investing Rs 2,000 for 20 years will be able to generate Rs 19,98,296, considering the conservative rate of 12 percent.

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Now, if an investor parks Rs 5,000 monthly, he/she can yield Rs 1.07 crore in 26 years (with the same rate of interest).

Here are 3-year and 5-year returns of some mutual funds

(Source: Moneycontrol)

As per the calculations provided by Scripbox, by starting an SIP of Rs 7,000 per month, it is possible to get over Rs 1 crore as maturity value in 20 years of saving (given the rate of return is 10 percent for the mutual fund).

However, this does not mean that the corpus will not fluctuate. The time horizon ensures that despite losses and gains cancelling each other out, the rate of return remains consistent, said Prateek Mehta, Co-Founder of Scripbox.

Click here to access Scripbox's SIP calculator.

(Edited by : Shoma Bhattacharjee)