In mutual fund investments via a Systematic Investment Plan (SIP), consistency is one of the major factors in creating wealth. While mutual funds are known to give attractive returns to investors, without maintaining consistency, investors may end up losing lakhs without realising.
ALSO READ: Cracking Rs 1 Crore SIP Goal: Why The First Rs 25 Lakh Is The Hardest Milestone
Generally, mutual fund investments are recommended to be done with a long-term horizon. The more time the investment gets, the more visible is the impact of compounding.
When investors pause or discontinue SIPs, they lose the benefit of compounding and market recovery phases. This can result in lower returns and a smaller corpus, which may cost lakhs over time. Even delaying SIPs can hurt the overall value of the corpus.
Calculations show that as little as two to three years of investment delay can cost you corpus significantly. Here, we assume someone starts investing at age 25 vs the other starting investment at age 28, considering they both stay invested till 50 years of age at a 10% annual step-up in contributions.
Here's What Their Investment May Turn Out To Be:
Investing since age 25:
Monthly amount: Rs 5,000
Step-up % (annual): 10%
Investment duration: 25 years
Expected rate of return: 12%
Invested amount: Rs 59,00,823
Estimated returns: Rs 1,54,76,906
Total value: Rs 2,13,77,730
Investing since age 28:
Monthly amount: Rs 5,000
Step-up % (annual): 10%
Investment duration: 22 years
Expected rate of return: 12%
Invested amount: Rs 42,84,164
Estimated returns: Rs 93,02,011
Total value: Rs 1,35,86,176
The calculation shows that delaying investments by just three years can hurt the investors's portfolio by almost Rs 78-80 lakh. This shows that consistency can play a significant role in the overall investment journey.
ALSO READ: Shankar Sharma's Hot Take: SIPs Are A Great Product, Just Not For Retail Investors
Even with consistency, mutual fund investments may not yield the desired result as returns are never guaranteed due to market-linked volatility. That is why investors are urged to always consult experts before making a long-term investment commitment to avoid any fiscal stress.
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