From retirement and emergencies to travel and leisure activities, you will need a good corpus to meet your needs in the future. Building a large corpus needs consistency and financial discipline. You can build a sizeable amount even with small investments over the years. It's not just about how much you invest, but the investment tenure plays a crucial role in determining overall returns.
Here, the key is starting early and maintaining uninterrupted investments over a long-term horizon. If you are looking to build a large corpus with small investments, mutual fund systematic investment plans (SIPs) could be a suitable option. Investors often prefer SIPs due to diversification opportunities, professional management and higher flexibility. Through steady, small contributions, investors can accumulate substantial wealth over the years.
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If you can afford to invest Rs 35,000 per month via SIP, you could reap a significant corpus over a long-term horizon. We have done some calculations to illustrate how a monthly SIP of Rs 35,000 will grow across varied tenures of 12, 15 and 20 years.
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Investing In SIP For 12 Years
Monthly investment: Rs 35,000
Tenure: 12 years
Total investment: Rs 50.4 lakh
Expected rate of return: 12% per annum
Estimated returns: Rs 62.39 lakh
Maturity corpus: Rs 1.12 crore
Investing In SIP For 15 Years
Monthly investment: Rs 35,000
Tenure: 15 years
Total investment: Rs 63 lakh
Expected rate of return: 12% per annum
Estimated returns: Rs 1.13 crore
Maturity corpus: Rs 1.77 crore
Investing In SIPs For 20 Years
Monthly investment: Rs 35,000
Tenure: 20 years
Total investment: Rs 84 lakh
Expected rate of returns: 12% per annum
Estimated returns: Rs 2.66 crore
Maturity corpus: Rs 3.5 crore
As you can see, the returns can be much higher when you keep investing for 20 years, compared to a shorter investment horizon of 12 or 15 years.
The above calculations demonstrate the power of compounding. The growth in the last few years is disproportionately higher than in the initial years in SIPs. This highlights the importance of choosing a well-performing fund and staying invested for the long run to potentially capture higher returns. However, it's important to assess all risk factors as mutual fund investments come with high risks due to market volatility and other factors.
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