Rs 250 Daily SIP vs Rs 7,500 Monthly SIP: Which can build higher corpus in 20, 25, and 30 years? See details to know
Rs 250 Daily SIP vs Rs 7,500 Monthly SIP: Systematic Investment Plan (SIP) is a method of investing in mutual funds where an investor can invest daily, weekly, monthly, quarterly, half-yearly, and annually. It provides investors an opportunity to start with a small investment at a prefixed frequency, and they can increase it gradually.
Rs 250 Daily SIP vs Rs 7,500 Monthly SIP: Mutual fund investors can invest in a mutual fund scheme through a lump sum and systematic investment plan (SIP). While in a lump sum scheme, they can invest one time; in a SIP, they can invest periodically. Many mutual funds start their SIPs with as little an amount as Rs 100. The daily SIP amount can be lower than that. Know how SIP investment in mutual funds works and what the expected returns will be in 20, 25, and 30 years if one starts a Rs 250 daily SIP or a Rs 7,500 monthly SIP.
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(Disclaimer: This is investment advice. Do your own due diligence or consult an expert for financial planning.)
How SIP is different than lump sum
In a lump sum investment, an investor invests an amount in one go. People make a lump sum investment in a mutual fund scheme when they get a large amount from somewhere, such as salary bonuses, inheritance shares, etc.
How SIP is different than lump sum
Even when they are making an SIP, they can do a lump sum investment whenever they get an amount.
In SIP, they invest money periodically. The period can be based on their income cycle.
What are different kinds of SIPs?
The most popular SIP mode is monthly, but investors can go with a daily, weekly, quarterly, half-yearly, or yearly SIP also. Not all mutual fund houses or financial service providers offer all kinds of SIPs. An investor needs to check with them for starting a certain duration SIP.
Is SIP investment amount fixed?
Investors can keep their SIP amount the same throughout the investment period. However, they can also increase or decrease their SIP amount. If their finances are not allowing them, they can also stop their SIP and restart a fresh one whenever their financial situation improves. They can also increase their SIP investment periodically through a step up SIP.
What is step up SIP?
In a step up SIP, one can increase the amount of their investment every six months or a year. This is suitable for those who want to increase their investment with a raise in their income.
What is the right time to start SIP?
One doesn't need to time market to start an SIP. When one invests through a SIP, they purchase net asset value (NAV) units in a mutual fund. The price of these units keeps changing everyday.
What is the right time to start SIP?
So, one buys NAVs at different prices every investment cycle. This difference is known as rupee cost averaging and, when accumulated, forms the basis of compounding in a mutual fund investment.
Calculation for story
We will show what will be the corpus generated from 2 SIPs—Rs 250 daily or Rs 7,500 monthly— in 20, 25, and 30 years. Here, in the daily SIP, the calculator takes 365 days for every year, irrespective of a leap year. As far as the monthly SIP is concerned, the calculator takes 30 days for a month, or 360 days a year, so there will be a difference in investments between the daily and monthly SIP on an yearly basis. We will take 12 per cent as the annualised SIP return rate.
Corpus from Rs 250 SIP investment in 20 years
The total investment in 20 years will be Rs 18,25,000.
Estimated capital gains will be Rs 57,95,990, and the expected corpus value will be Rs 76,20,990.
Corpus from Rs 250 SIP investment in 25 years
Continuing the same SIP investment for another 5 years means the total investment will jump to Rs 22,81,250.
Expected capital gains will be Rs 1,22,28,951, and the expected return will be Rs 1,45,10,201.
Corpus from Rs 250 SIP investment in 30 years
If the same investment is continued to 30 years, the invested amount will be Rs 27,37,500.
Estimated capital gains will be Rs 2,43,24,424, and the expected return will be Rs 2,70,61,924.
Corpus from Rs 7,500 monthly SIP investment in 20 years
If one starts a Rs 7,500 monthly SIP, they will invest Rs 18,00,000 in 20 years.
On this investment, their estimated returns will be Rs 56,93,609, and the estimated corpus will be Rs 74,93,609.
Corpus from Rs 7,500 monthly SIP investment in 25 years
If the investment is continued for 25 years, the total investment will be Rs 22,50,000.
Expected capital gains on this investment will be Rs 1,19,82,263, and the expected corpus will be Rs 1,42,32,263.
Corpus from Rs 7,500 monthly SIP investment in 30 years
If they continue for another 5 years, the total investment in 30 years will be Rs 27,00,000.
Expected capital gains on investing this amount will be Rs 2,37,74,353, and the expected corpus will be Rs 2,37,74,353.