Power of Investment: Rs 10,000 monthly SIP, 12% return, what corpus one can generate with 10, 20, and 30 years of investing
Power of Investment: The duration of investment plays a key role in creating a large retirement corpus. If an investor starts investing with a small monthly amount and continues it for a long duration, their corpus can be much larger than someone starting with a large amount and short duration.
Power of Investment: Duration of investment is an important factor in investing. If one starts investing early with a small amount for long durations such as 20 years or over, they can generate a much larger corpus compared to a late starter with a larger investment amount for a shorter duration. E.g., if one starts their investment journey with a Rs 5,000 monthly SIP in a mutual fund scheme, does it for 30 years, and gets 12 per cent annualised SIP returns on that, their estimated corpus will be Rs 1,76,49,569 on a Rs 18,00,000 investment. But if they invest Rs 20,000 monthly for 19 years, their estimated corpus will be Rs 1,75,06,508 on a Rs 45,60,000 investment. It happens because of power of compounding, where investment grows faster with time.
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Investment conditions
Here, we will discuss how 3 persons (A, B, and C) with a Rs 10,000 monthly SIP investment each for 10, 20, and 30 years can generate. Each will get annualised SIP returns (XIRR) of 12 per cent on their investments.
Investment conditions for A
A will invest Rs 10,000 monthly through SIP for 10 years. But they won't withdraw money till 30 and let their retirement corpus grow.
Investment conditions for B
B will invest Rs 10,000 monthly in SIP for 20 years. They will also not withdraw their money till 30 and let it grow.
Investment conditions for C
C will invest Rs 10,000 monthly in SIP for 10 years. They will not withdraw their corpus and will let it grow for 30 years.
Corpus for A after Rs 10,000 monthly SIP investment in 30 years
The total investment in 30 years will be Rs 36,00,000, estimated returns will be Rs 3,16,99,138, and the estimated retirement corpus will be Rs 3,52,99,138.
Corpus for B after Rs 10,000 monthly SIP investment in 20 years
The total investment in 20 years will be Rs 24,00,000, estimated returns will be Rs 75,91,479, and the estimated corpus will be Rs 99,91,479.
Corpus for B in 30 years
Now from here onwards, they won't invest and keep this money grow for 10 years at 12 per cent annualised growth.
The estimated returns will be Rs 2,10,40,433, and the estimated corpus will be Rs 3,10,31,862.
Corpus for C after Rs 10,000 monthly SIP investment in 10 years
The total investment in 10 years will be Rs 12,00,000, estimated returns will be Rs 11,23,391, and the estimated corpus will be Rs 23,23,391.
Corpus for C in 30 years
Now from here onwards, they won't invest and keep this money grow for 20 years at 12 per cent annualised growth.
The estimated returns will be Rs 2,00,88,720, and the estimated corpus will be Rs 2,24,12,111.
Benefit of investing
Between A and B, A invested Rs 12,00,000 more in 10 years, and got the estimated higher corpus of Rs 42,67,276.
Benefit of investing
Between A and C, A invested Rs 24,00,000 more in 20 years, and got the estimated higher corpus of 1,28,87,027.
That's the power of compounding, the longer one stays in their investment, the larger their corpus can be despite investing a little more.