A large investment portfolio does not necessarily start with a large sum of money. For many Indian investors, the more practical route to wealth accumulation lies in investing regularly and allowing time to do the heavy lifting.
Equity mutual fund SIPs make this approach accessible by enabling fixed monthly contributions. The combination of rupee-cost averaging and compounding can turn disciplined savings into significant wealth over an extended period.
A monthly investment of Rs 25,000 may appear relatively modest at the outset, but time can significantly alter its eventual value. For an investor starting an equity SIP today, the potential corpus after 10, 20 and 30 years offers a clear illustration of how compounding can accelerate wealth creation.
Investing Rs 25,000 every month translates into Rs 3 lakh being put to work each year. At an assumed annualised return of 12%, the value of the portfolio could rise sharply as the holding period extends from a decade to two or three decades.
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Using 12% per annum as the assumed return, a commonly used illustration for diversified equity mutual funds in India, the potential growth of a Rs 25,000 monthly SIP looks like this:
Investing In Mutual Fund SIPs For 10 Years:
Monthly investment: Rs 25,000
Tenure: 10 years
Total investment: Rs 30 lakh
Expected rate of return: 12%
Estimated returns: Rs 26.01 lakh
Maturity corpus: Rs 56.01 lakh
Investing In Mutual Fund SIPs For 20 Years:
Monthly investment: Rs 25,000
Tenure: 20 years
Total investment: Rs 60 lakh
Expected rate of return: 12%
Estimated returns: Rs 1.7 crore
Maturity corpus: Rs 2.3 crore
Investing In Mutual Fund SIPs For 30 Years:
Monthly investment: Rs 25,000
Tenure: 30 years
Total investment: Rs 90 lakh
Expected rate of return: 12%
Estimated returns: Rs 6.8 crore
Maturity corpus: Rs 7.7 crore
The effect of staying invested becomes increasingly pronounced with time. Moving from a 10-year to a 20-year horizon can substantially enlarge the corpus, yet the next decade can produce an even bigger difference. Although the investor adds another Rs 30 lakh between years 20 and 30, the projected portfolio value could climb by several crores.
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The 12% figure is purely illustrative and should not be treated as an expected return. Equity mutual funds are market-linked investments, meaning their performance can vary significantly and future returns cannot be guaranteed.
The eventual value of a Rs 25,000 monthly SIP held for 30 years can look very different when the assumed rate of return changes. While keeping the contribution unchanged can still lead to a substantial corpus, investors whose earnings increase over time could explore raising the SIP amount at regular intervals.
Time is one of the most important ingredients in the compounding equation. Keeping a Rs 25,000 monthly SIP running for decades could allow accumulated returns to generate further returns, potentially turning a regular saving habit into a substantial corpus over the long run.
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