Building a sizeable mutual fund corpus does not necessarily require a large investment at the start. By setting aside a fixed amount every month, investors can build a regular savings habit and give their money time to grow through compounding. This makes Systematic Investment Plans (SIPs) a convenient option for young Indians looking to start investing.
But how much difference does a higher monthly SIP make to the final corpus? Does investing twice or four times as much translate into a proportionately larger corpus? A comparison of monthly SIPs of Rs 5,000, Rs 10,000 and Rs 20,000 over 15 years helps put this into perspective.
What Can A Rs 5,000 Monthly SIP Generate?
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Even a relatively small monthly investment can make a difference over a long period. A person investing Rs 5,000 through an equity mutual fund SIP for 15 years would contribute Rs 9 lakh in total.
If the fund delivers an annualised return of 12%, the accumulated value could be around Rs 23.8 lakh. This would put the estimated investment gains at Rs 14.8 lakh, highlighting the potential of staying invested over the long term.
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How Much Wealth Can Rs 10,000 Build?
Increasing the monthly SIP to Rs 10,000 can substantially raise the potential value of the investment over 15 years. Assuming an annualised return of 12%, the accumulated corpus could reach nearly Rs 47.59 lakh. Against a total investment of Rs 18 lakh, this would translate into estimated gains of Rs 29.59 lakh.
A corpus of this size could provide financial support for important life goals, including making a down payment on a property, paying for higher education or meeting other major expenses.
What If You Invest Rs 20,000 Every Month?
Those who have a higher amount available for monthly investment could build a corpus close to Rs 1 crore through a Rs 20,000 SIP. Assuming an annualised return of 12%, continuing the investment for 15 years could take its value to approximately Rs 95.19 lakh. During this period, the investor would contribute Rs 36 lakh, with the remaining Rs 59.19 lakh coming from estimated returns.
The projection demonstrates how a higher monthly contribution, combined with a long investment horizon, can significantly increase the potential value of a mutual fund portfolio.
SIP Returns: A Comparison
The projected figures are based on an assumed annualised return of 12% and should be treated as estimates, not assured returns. Mutual funds are exposed to market fluctuations, meaning the final value of an SIP will depend on market movements and the performance of the chosen scheme.
Investors need not stretch their budgets to start building a mutual fund portfolio. Beginning with Rs 5,000 a month and raising the contribution as earnings increase can be a practical way to build wealth over time.
Time can be one of the biggest advantages in long-term investing. Giving investments a longer period to grow allows compounding to play a greater role in building wealth. Investors may benefit more from beginning with an affordable monthly amount early on than postponing their plans in the hope of making a bigger contribution later.
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