Power of Compounding: Rs 3,300 Monthly SIP for 33 Years vs Rs 33,000 Monthly SIP for 13 Years; know which one can give you higher returns in long term?
Power of Compounding: When you invest Rs 33,00 per month in SIPs for 33 years, you can accumulate Rs 1,68,10,194. The total investment in 33 years will be Rs 13,06,800.
Systematic Investment Plan (SIP) is an investment method through which you can invest in mutual funds. In SIPs, you can contribute a fixed amount regularly to build wealth over time. SIPs are generally considered a safe way of investment but are still subject to market risks. However, the rupee cost-averaging method can help you average out the cost of your units purchased over time. This means when markets rise, you get fewer units while when they fall, you buy more units.
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SIP provides flexible options
In SIP, you can stop the installment anytime. It also allows you to adjust your investment amount.
Compounding benefits
Investment in mutual funds through SIPs also benefits from compounding over time.
Market risk
Yes, SIPs are subject to market risk.
Equity SIPs
Investment in equity SIPs can be of higher risk.
Debt SIPs
Investment in debt SIPs are relatively safer.
Invest Rs 33,00 per month for 33 years
When you invest Rs 33,00 per month in SIPs for 33 years, you can accumulate Rs 1,68,10,194. The total investment in 33 years will be Rs 13,06,800.
Calculations of accumulating Rs 1,68,10,194 fund
Total investment: Rs 13,06,800
Estimated return rate per annum: 12%
Total years of investment: 33
Estimated returns: Rs 1,55,03,394
Maturity amount: Rs 1,68,10,194
Invest Rs 33,000 per month for 33 years
When you invest Rs 33,000 per month in SIPs for 13 years, you can accumulate Rs 1,24,05,728. The total investment in 33 years will be Rs 51,48,000.
Calculations of accumulating Rs 1,24,05,728 fund
Total investment: Rs 51,48,000
Estimated return rate per annum: 12%
Total years of investment: 13
Estimated returns: Rs 72,57,728
Maturity amount: Rs 1,24,05,728
Conclusion
Here, we observe that at Rs 33,000 monthly investment for 13 years, the money invested is more than the amount invested in Rs 3,300 monthly SIP investment for 33 years, but the corpus built in the second instance is more than the first. This is due to the power of compounding.
Investing in mutual funds is subject to market risks. Consult your advisor before making any investment.