Indian investors are increasingly exploring Systematic Investment Plans (SIPs) these days as an investment avenue due to flexibility and higher returns compared to traditional savings instruments. Mutual Fund SIPs help investors to put their money across multiple asset classes, without direct exposure to stock market risks.
It’s a common notion that you need a large amount to start investing in schemes offering higher returns. However, you can start your investment journey even with a small amount as low as Rs 100 per month through SIPs. Consistent investment of small amounts over a long tenure helps to build a sizable corpus fund. The wide range of mutual funds currently available in the market caters to the needs of all types of investors with different investment goals.
Even with just Rs 100 per month, one can start their investment journey and benefit from the power of compounding. This helps your money grow faster over the long term. SIPs also reduce the risk of market fluctuations by spreading out investments.
This is evident if one looks at how the SIPs compound over five, 10- and 15-year investment periods. For a small amount like Rs 100, which is equivalent to an yearly investment of Rs 1,200, the corpus fund can grow into a sizable amount.
Let’s look into the following scenarios:
Rs 100 per month SIP for five years
Invested amount: Rs 6,000
Expected returns: 12% per annum
Estimated returns: Rs 2,248
Final value: Rs 8,248
Rs 100 per month SIP for 10 years
Invested amount: Rs 12,000
Expected returns: 12% p.a.
Estimated returns: Rs 11,233
Total value: Rs 23,233
Rs 100 per month SIP for 15 years
Invested amount: Rs 18,000
Expected returns: 12% p.a.
Estimated returns: 32,457
Total value: Rs 50,457
The Step-Up SIP schemes can also help you grow your investments significantly. With the step-up facility, you can gradually increase the amount at a regular interval, like monthly, quarterly, or yearly.
This approach aligns with your rising income, making it easier to save more without feeling the pinch. In this case, the power of compounding could be more rewarding compared to simple SIPs.
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