Half-yearly SIP vs Quarterly SIP: Rs 22,000 semi-annual SIP or Rs 11,000 quarterly SIP, which works better over 25 years?
SIP Return Estimates: Did you know that systematic investment plans (SIPs) come in different frequencies, the most commonly used being monthly? Different SIP frequencies enable investors to channelise their savings towards their preferred mutual fund schemes as per their preference or investment style. In this article, lets look at return estimates on two such frequencies with the same amount invested at an expected annualised return of 12 per cent.
Quarterly SIP vs Half-yearly SIP vs Lump Sum Mutual Fund Investment: Did you know that fund houses today offer different types of systematic investment plans (SIPs) to suit your investment style and cash flow? By carefully selecting the right frequency and amount, one can make the most of their SIP to invest in the mutual fund scheme of choice without having to disturb their cash flow or compromise on their regular expenses. In this article, you can compare the potential outcomes of different investments in a mutual fund scheme at the same expected annualised return of 12 per cent and the same investment period of 25 years: A quarterly SIP of Rs 11,000, a semi-annual (half-yearly) SIP of Rs 22,000 and a lump sum investment of Rs 11 lakh.
However, nothing beats the outcome of a lump sum mutual fund investment, wherein the investor parks the entire amount of money at once. This is because of compounding. So, comparing these estimates with a lump sum investment of the same total amount invested will further highlight the difference between these investments.
Which one would you choose: Rs 11,000 quarterly SIP, Rs 22,000 half-yearly SIP or a lump sum investment of Rs 11 lakh—each for 25 years?
Let’s compare the three scenarios: A quarterly SIP of Rs 11,000 for 25 years, a half-yearly Rs 22,000 SIP for 25 years and a lump sump investment of Rs 11 lakh for 25 years.
In each of the three scenarios, the total sum invested will be Rs 11 lakh.
Scenario 1: Rs 11,000 quarterly SIP for 25 years
At the expected annualised return of 12 per cent, a quarterly SIP of Rs 11,000 will accumulate a corpus of an estimated Rs 68.81 lakh (with a principal of Rs 11 lakh and an expected return of Rs 57.81 lakh), show calculations.
| Period (in Years) | Investment | Return | Corpus |
| 1 | 44,000 | 3,400 | 47,400 |
| 2 | 88,000 | 12,750 | 1,00,750 |
| 3 | 1,32,000 | 28,796 | 1,60,796 |
| 4 | 1,76,000 | 52,377 | 2,28,377 |
| 5 | 2,20,000 | 84,441 | 3,04,441 |
| 6 | 2,64,000 | 1,26,052 | 3,90,052 |
| 7 | 3,08,000 | 1,78,407 | 4,86,407 |
| 8 | 3,52,000 | 2,42,856 | 5,94,856 |
| 9 | 3,96,000 | 3,20,916 | 7,16,916 |
| 10 | 4,40,000 | 4,14,296 | 8,54,296 |
| 11 | 4,84,000 | 5,24,918 | 10,08,918 |
| 12 | 5,28,000 | 6,54,947 | 11,82,947 |
| 13 | 5,72,000 | 8,06,818 | 13,78,818 |
| 14 | 6,16,000 | 9,83,272 | 15,99,272 |
| 15 | 6,60,000 | 11,87,395 | 18,47,395 |
| 16 | 7,04,000 | 14,22,660 | 21,26,660 |
| 17 | 7,48,000 | 16,92,975 | 24,40,975 |
| 18 | 7,92,000 | 20,02,740 | 27,94,740 |
| 19 | 8,36,000 | 23,56,905 | 31,92,905 |
| 20 | 8,80,000 | 27,61,043 | 36,41,043 |
| 21 | 9,24,000 | 32,21,426 | 41,45,426 |
| 22 | 9,68,000 | 37,45,115 | 47,13,115 |
| 23 | 10,12,000 | 43,40,052 | 53,52,052 |
| 24 | 10,56,000 | 50,15,183 | 60,71,183 |
| 25 | 11,00,000 | 57,80,570 | 68,80,570 |
Scenario 2: Rs 22,000 half-yearly SIP for 25 years
At the same expected return, a Rs 22,000 half-yearly SIP will lead to a corpus of an estimated Rs 67.71 lakh (with a Rs 11 lakh principal and an estimated return of Rs 56.71 lakh), as per calculations.
| Period (in Years) | Investment | Return | Corpus |
| 1 | 44,000 | 4,039 | 48,039 |
| 2 | 88,000 | 14,016 | 1,02,016 |
| 3 | 1,32,000 | 30,664 | 1,62,664 |
| 4 | 1,76,000 | 54,809 | 2,30,809 |
| 5 | 2,20,000 | 87,376 | 3,07,376 |
| 6 | 2,64,000 | 1,29,407 | 3,93,407 |
| 7 | 3,08,000 | 1,82,071 | 4,90,071 |
| 8 | 3,52,000 | 2,46,683 | 5,98,683 |
| 9 | 3,96,000 | 3,24,720 | 7,20,720 |
| 10 | 4,40,000 | 4,17,840 | 8,57,840 |
| 11 | 4,84,000 | 5,27,908 | 10,11,908 |
| 12 | 5,28,000 | 6,57,019 | 11,85,019 |
| 13 | 5,72,000 | 8,07,527 | 13,79,527 |
| 14 | 6,16,000 | 9,82,076 | 15,98,076 |
| 15 | 6,60,000 | 11,83,637 | 18,43,637 |
| 16 | 7,04,000 | 14,15,550 | 21,19,550 |
| 17 | 7,48,000 | 16,81,565 | 24,29,565 |
| 18 | 7,92,000 | 19,85,899 | 27,77,899 |
| 19 | 8,36,000 | 23,33,286 | 31,69,286 |
| 20 | 8,80,000 | 27,29,049 | 36,09,049 |
| 21 | 9,24,000 | 31,79,167 | 41,03,167 |
| 22 | 9,68,000 | 36,90,357 | 46,58,357 |
| 23 | 10,12,000 | 42,70,169 | 52,82,169 |
| 24 | 10,56,000 | 49,27,085 | 59,83,085 |
| 25 | 11,00,000 | 56,70,633 | 67,70,633 |
Scenario 3: Rs 11 lakh lump sum investment for 25 years
A one-time investment of Rs 11 lakh will lead to a corpus of approximately Rs 1.87 crore (with an estimated return of Rs 1.76 crore).
Power of Compounding | The larger the sum invested for longer, the greater the result...
Financial planners often emphasise the importance of investing and staying invested for longer periods in order to tap the power of compounding, which is nothing but a process where interest earned on an investment is reinvested to generate even more interest, creating a snowball effect can essentially build wealth significantly over time. Read more on the power of compounding
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