Rs 1,000 SIP for 40 Years vs Rs 20,000 SIP for 15 Years: Which can generate larger corpus for you? See calculations to know

Rs 1,000 SIP for 40 Years vs Rs 20,000 SIP for 15 Years: Rs 5,000 monthly SIP for 39 years vs Rs 50,000 monthly SIP for 20 years, which can create a higher corpus?

When the second investment amount is 10 times the first investment amount, the obvious response can be that such a large amount can create a larger corpus.

But it's not the case.

If both investments give a 12 per cent annualised return each, a Rs 5,000 monthly SIP investment for 39 years can create an estimated corpus of Rs 5,26,68,385, while a Rs 50,000 monthly SIP investment for 20 years can create an estimated corpus of Rs 4,99,57,396.

That's just half the story!

While a Rs 5,000 monthly SIP investment means a total investment of Rs 23,40,000 in 39 years, a Rs 50,000 monthly SIP investment means a total investment of Rs 1,20,00,000, which is 5 times more than the investment in the first case.

This is the beauty of compound returns.

When you get returns on returns, your corpus grows faster with time.

A smaller amount invested for more years can give a higher corpus compared to a larger amount invested for a shorter period.

Let's see one more example of the power of compounding and also see which of the two, Rs 1,000 monthly SIP investment for 40 years or Rs 20,000 monthly SIP investment for 15 years, can give a higher corpus. 

Rs 3,000 SIP for 40 years vs Rs 50,000 SIP for 17 years

Let's widen this gap more and take the example of monthly SIPs, which are Rs 47,000 apart.

We are taking examples of two persons with monthly SIP investments of Rs 3,000 and Rs 50,000, respectively.

In both cases, the expected annualised rate of return is 12 per cent. 

The one who starts a Rs 3,000 monthly SIP for 40 years will invest an overall amount of Rs 14,40,000; estimated capital gains will be Rs 3,42,07,261, and the estimated corpus will be Rs 3,56,47,261.

The second person who invests Rs 50,000 a month in a SIP will invest Rs 1,02,00,000 overall.

Their estimated capital gains will be Rs 2,31,96,041, and the estimated corpus will be Rs 3,33,96,041.

Here, we saw that the first person invested Rs 87,60,000, less than the first person, yet they could create an extra corpus of Rs 22,51,220. 

This is because they get 13 extra years for compound growth on their returns. 

Rs 1,000 SIP for 40 years vs Rs 20,000 SIP for 15 years

What will happen if one invests Rs 1,000 in a monthly SIP for 40 years and another person invests Rs 20,000 in a monthly SIP for 15 years, and both get a 12 per cent annualised return? 

The overall investment at Rs 1,000 monthly SIP will be Rs 4,80,000, estimated capital gains will be Rs 1,14,02,420, and the estimated corpus will be Rs 1,18,82,420.

For a 20,000 monthly SIP investment, the overall investment will be Rs 36,00,000, estimated capital gains will be Rs 64,91,520, and the estimated corpus will be Rs 1,00,91,520.

So, a Rs 1,000 monthly SIP investment is a clear winner here because 25 years of extra compounding can grow its investment to a higher corpus than the one generated from a 20,000 monthly SIP investment for 15 years. 

(Disclaimer: These are projections and not investment advice. Do your own due diligence of consult an expert for financial planning.)