Power of Compounding: Can Rs 11,000 monthly SIP investment create Rs 8.18 crore retirement corpus? Know here
Power of Compounding: Retirement planning should be started early. The advantage of it is that, even if one starts with a low monthly investment, they can create a large corpus that can take care of their retirement life.
Retirement Corpus: Is a Rs 1,000 monthly SIP investment small to you? Or Rs 2,000, Rs 5,000, or Rs 10,000? An investment that appears to be small to you can be big for someone else. It depends on your income, savings, and approach to investment. But sometimes, people delay investment, thinking that they have a small monthly amount to invest, and such a small amount won't help them reach anywhere or achieve a financial goal. They delay the investment for years and years. Cost of delay is a sin in investment. One can create a large corpus with a small amount if their investment horizon is long, but it's tough to create a large corpus with a large monthly investment if their investment horizon is short. Due to compounding, a Rs 11,000 monthly SIP investment can help one reach a Rs 8.18 crore corpus.
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Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for retirement planning.)
Cost of delay in retirement corpus
A starts a monthly SIP investment in a mutual fund at 25 years of age, and B starts the same at 30 years of age. Both want to do investments till they are 50 years old. Both are expecting 12 per cent annualised return from their investments.
Cost of delay in retirement corpus
A's investment in 25 years will be 30,00,000; estimated capital gains will be Rs 1,59,76,351, and the estimated corpus will be Rs 1,89,76,351.
B's investment in 20 years will be Rs 24,00,000; estimated capital gains will be Rs 75,91,479, and the estimated corpus will be Rs 99,91,479.
Cost of delay in retirement corpus
It shows that 5 years of extra investment, which is Rs 6,00,000 in this case, can help them generate an estimated Rs 89,84,872.
How small investment can do magic in long term
Let's go with a Rs 1,000 monthly SIP investment and see how it can grow in 20 and 40 years at 12 per cent annualised return.
How small investment can do magic in long term
In 20 years, the investment will be Rs 2,40,000, estimated capital gains will be Rs 7,59,148, and the estimated corpus will be Rs 9,99,148.
In 40 years, investment 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.
How small investment can do magic in long term
The investment in 20 years is Rs 2,40,000 more, but the extra estimated corpus accumulated is Rs 1,08,83,272.
Disadvantage of leaving investment early
A and B start with a Rs 5,000 monthly SIP investment. They do it for 20 years. A stops investing after 20 years, but they don't withdraw. B continues it for 30 years. Both get 12 per cent annualised return each. Let's see what the corpuses will be for both after 30 years.
Disadvantage of leaving investment early
A's estimated corpus in 30 years will be Rs 1,55,16,010 on a Rs 12,00,000 investment.
B's estimated corpus in 30 years will be Rs 1,76,49,569 in Rs 18,00,000 investment.
Corpus from Rs 11,000 monthly investment in 20 years
We will calculate at 12.5 per cent annualised return.
Investment in 20 years will be Rs 26,40,000; estimated capital gains will be Rs 91,24,715, and the estimated corpus will be Rs 1,17,64,715.
Corpus from Rs 11,000 monthly investment in 30 years
Investment in 30 years will be Rs 39,60,000; estimated capital gains will be Rs 3,94,71,448, and the estimated corpus will be Rs 4,34,31,448.
Corpus from Rs 11,000 monthly investment in 35 years
Investment in 35 years will be Rs 46,20,000; estimated capital gains will be Rs 7,71,78,725, and the estimated corpus will be Rs 8,17,98,725.
Who can achieve it?
Anyone who starts early. A 25-year-old person who aims to have a similar corpus at 60 years may opt for it.