Power of Compounding: From Rs 1,000 monthly SIP to Rs 1.64 crore corpus; in how many years can one achieve this target?
Power of Compounding: Rs 1,000 monthly SIP investment may appear to be small for many investors, but with consistent investing, one can create a sizeable corpus even with this amount.
Power of Compounding: What is Rs 1,000 for many of us? An outing for a movie or a dinner! Or probably not even that. What are the daily, weekly, or monthly expenditures this amount can bear for you? Not many, or some of them. For people paying income tax, a Rs 1,000 amount may not be a big amount. But in terms of investing, even this small amount can help create a sizeable corpus. The conditions are to pick an investment avenue that can give consistent returns, start investing early in life, and stay in it for a long time. The power of compounding will help your corpus grow faster as it gets older.
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Why time matters in compounding
Time is important since in investment schemes that offer compounding, the investor gets compounding on the entire investment. So, if one has invested for 10 years and another for 20, the second will get faster growth in the second half of 10 years of their investment.
Example of power of compounding
A and B start a Rs 2,500 monthly SIP each. A does it for 15 years and B for 30 years. Both get 12 percent annualised return each.
In 15 years, A will have an estimated corpus of Rs 12,61,440 on a Rs 4,50,000 investment.
Example of power of compounding
B will have estimated Rs 88,24,784 corpus on a Rs 9,00,000 investment.
So, here, we can see how B's corpus grew faster in the second half of their investment.
Example of different SIP investments
A starts a Rs 20,000 monthly SIP investment for 15 years, and B starts a Rs 5,000 monthly SIP investment and does it for 30 years.
After 15 years, A will have an estimated corpus of Rs 1,00,91,520 on a Rs 36,00,000 investment in 15 years.
Example of different SIP investments
After 30 years, B will have an estimated corpus of Rs 1,76,49,569 on an investment of just Rs 18,00,000.
Despite having a low amount, B generated a higher corpus because they stayed for a longer period in their investment.
How Rs 1,000 monthly SIP investment can reach at Rs 1.64 cr corpus
Here we will take the example of a Rs 1,000 monthly investment in an equity fund where the expected annualised return in a direct plan of a mutual fund is 13 per cent. The investment period will be 40 years.
Corpus from Rs 1,000 monthly SIP investment in 10 years
In 10 years, the investment will be Rs 1,20,000, and the estimated corpus will be Rs 2,46,681.
Corpus from Rs 1,000 monthly SIP investment in 20 years
In 20 years, the investment will be Rs 2,40,000, and the estimated corpus will be Rs 11,45,519.
Corpus from Rs 1,000 monthly SIP investment in 30 years
In 30 years, the investment will be Rs 3,60,000, and the estimated corpus will be Rs 44,20,647.
Corpus from Rs 1,000 monthly SIP investment in 40 years
In 40 years, investment will be Rs 4,80,000 and the estimated corpus will be Rs 1,63,54,339.