Compounding in SIP: How with just Rs 500 starting investment, you can accumulate over Rs 21.37 lakh and Rs 44 lakh

Compounding in SIP: Nowadays people are increasingly investing money in mutual funds through a Systematic Investment Plan (SIP). Mutual funds are market-linked, so the return on investment in it cannot be guaranteed, but the historical data of the last few years shows that on an average, the return in SIPs is 12 per cent.

In many of the equity funds, the return in the Year 2023 was more than 50 per cent.

Though the historic return is not the guarantee of the future return, but many of mutual funds last year gave above 40 per cent returns. 

In this write-up, we will tell you how your starting investment of just Rs 500 a month through SIP can help you accumulate more than Rs 21 lakh in 25 years.  

We are taking Rs 500 as the starting amount here since the minimum investment in most of the mutual funds is Rs 500.

Also, we take assume the return of 12 per cent annualised return considering the histoic data.

Compounding in SIP: How to get more than Rs 21 lakh

If you start investing in SIP with even Rs 500, you will continue this investment for at least 25 to 30 years.

Also, you will have to increase the amount in this investment by at least 10 per cent every year.

For example, if you started investing with Rs 500, then next year you will have to invest 10 per cent of Rs 500 i.e. Rs 50, i.e. Rs 550.

In the next year, 10 per cent of Rs 550 i.e. Rs 55 will have to be added to it.

In such a situation, you will have to invest Rs 605 in that year.

Similarly, you have to continue your investment by adding 10 per cent amount every year.

In this way, your total investment in 25 years will be Rs 5,90,082.

If you calculate the return at 12 per cent, you will get Rs 15,47,691 only from capital gains.

In this way, after 21 years, you will get a total of Rs 21,37,773.
 

Compounding in SIP: How to get Rs 44,17,062 in 30 years

If you continue the investment for 5 more years i.e. for about 30 years, your total investment will be Rs 9,86,964, but at the rate of 12 per cent, the interest on it will be Rs 34,30,098, and after 30 years, you will get a total of Rs 44,17,062 lakh.