Power of Compounding: How fast your Rs 10,000 monthly investment grows in mutual fund SIP, NPS, PPF, and EPF schemes in 10, 20, and 30 years
Compound Interest/Growth: Mutual fund SIP investment, National Pension System (NPS), Employees' Provident Fund (EPF) and Public Provident Fund (PPF) are some of the schemes that offer compound interest or growth and where you can invest for 30 years or more.
Power of Compounding: Compound interest is interest on interest that grows your investment faster as it gets older. When you invest in a scheme offering compound interest or growth, your principal amount, along with interest, becomes your principal amount for the next compound interest cycle. For the next cycle, you get interest on the entire amount and not just on your initial investment. E.g., if you invest Rs 1 lakh in a scheme and get 8 per cent annual growth on that, your total amount at the end of the year will be Rs 1.08 lakh. For the next compound interest cycle, you will get 8 per cent interest on Rs 1.08 lakh and not on Rs 1 lakh. Mutual fund SIP investment, National Pension System (NPS), Employees' Provident Fund (EPF) and Public Provident Fund (PPF) are some of the schemes that offer compound interest or growth and where you can invest for 30 years or more. Learn how fast your money can grow in each scheme in 10, 20, and 30 years. For standardisation, we are taking a monthly investment of Rs 10,000, or Rs 120,000 a year.
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Mutual Fund SIP Calculator
In a systematic investment plan (SIP), you can invest a monthly amount in a mutual fund scheme. If you start a Rs 10,000 investment in a scheme and get an annualised 12 per cent return on that, in 10 years, your invested amount will be Rs 12,00,000, and the expected amount will be Rs 23,23,391; in 20 years, the invested amount will be Rs 24,00,000, and the expected amount will be Rs 99,91,479; in 30 years, the invested amount will be Rs 36,00,000, and the expected amount will be Rs 3,52,99,138.
Mutual Fund SIP Calculator
Thus, from 10 years to 30 years, the invested amount increased by only Rs 24,00,000, but the expected amount increased by nearly Rs 3,30,00,000. This is because of the power of compounding.
National Pension System (NPS) Calculator
NPS is a market-linked retirement scheme where one gets compound growth. One can select the scheme master and the equity exposure as per their age and risk appetite. It offers a lump sum amount and a monthly pension at retirement.
National Pension System (NPS) Calculator
If you get 10 per cent annual growth on your NPS investments, in 10 years, your invested amount will be Rs 12,00,000, and the expected amount will be Rs 20,65,521; in 20 years, your invested amount will be Rs 24,00,000, and the expected amount will be Rs 76,56,970; in 30 years, your invested amount will be Rs 36,00,000, and the expected amount will be Rs 2,27,93,254. So, the journey from 20 years to 30 years is much faster than the journey from 0 to 20 years.
PPF Calculator
In PPF, the lock-in period is 15 years, which means you can't withdraw money before 15 years. You can extend your PPF account for further blocks of five years. The post office PPF scheme offers 7.1 per cent annual compound interest.
PPF Calculator
In 10 years, your invested amount will be Rs 12 lakh, and the expected amount will be Rs 17.41 lakh; in 20 years, the investment will be Rs 24 lakh, and the expected amount will be Rs 52.40 lakh; in 30 years, the investment will be Rs 36 lakh, and the expected amount will be Rs 1.23 crore.
EPF Calculator
Employees' Provident Fund (EPF) is also a retirement scheme, where the lock-in period is retirement age. The scheme at present offers 8.25 per cent compound interest. An employee contributes a part of their basic salary and dearness allowance. The employer matches that amount and contributes it to the employee's EPF account.
EPF Calculator
In 10 years, the invested amount will be Rs 12,00,000 and the expected amount will be Rs 18,42,000; in 20 years, the invested amount will be Rs 24,00,000 and the expected amount will be Rs 61,11,683.25; in 30 years, the invested amount will be Rs 36,00,000, and the expected amount will be Rs 1,54,07,592.06.