Rs 3,500 Monthly SIP for 35 years vs Rs 35,000 Monthly SIP for 16 Years: Which can give you higher corpus in long term? See calculations
Rs 3,500 Monthly SIP for 35 years vs Rs 35,000 Monthly SIP for 16 Years: Compound interest is interest that is calculated not only on the principal of an investment or loan but also on the accumulated interest from prior periods.
SIP (systematic investment plan) is one of the most popular mutual fund investments. Since you invest a fixed amount regularly in SIPs, this investment method makes you a disciplined investor. Even a small amount of SIP every month can garner a huge amount at retirement. In this article, we will discuss how a small amount of Rs 3,500 per month investment for 35 years can get you better returns than a bigger amount of Rs 35,000 monthly investment for 16 years.
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How does SIP work?
Once you apply for an SIP, the amount is automatically debited from your bank account to buy the mutual fund units at the predetermined time interval. Then you get the mutual fund units depending on the NAV of the mutual fund.
What is NAV?
Nav (net asset value) represents a mutual fund's per share market value.
When to invest in SIP?
You can start investing in SIP at any time as regular investment can average the cost.
What is rupee cost averaging?
With the rupee cost averaging method you can take advantage of market volatility. This means when you invest a fixed amount regularly, SIP can average out the value of each unit.
What is compound interest?
Compound interest is interest that is calculated not only on the principal of an investment or loan but also on the accumulated interest from prior periods.
How much one can invest in a SIP?
There is no limit to the amount you can invest in a SIP. The minimum amount that you can invest is Rs 500 per month.
SIP Tenure
There is no maximum tenure of a SIP.
Can you modify your SIP amount?
Yes, you can anytime decrease or increase your SIP amount.
SIP calculations
This article will comparison two monthly SIP investments- Rs 3,500 monthly for 35 years and Rs 35,000 monthly for 16 years. The annualised return in each case will be 12 per cent. Let's see which one gives higher returns.
What will be the corpus from Rs 3,500 monthly SIP investment in 35 years?
In 35 years, you can accumulate Rs 2,27,33,442 by investing Rs 3,500 per month. The total investment will be Rs 14,70,000 and the total estimated returns will be Rs 2,12,63,442.
What will be the corpus from Rs 35,000 monthly SIP investment in 16 years?
In 16 years, you can accumulate Rs 2,03,48,237 by investing Rs 35,000 per month. The total investment will be Rs 67,20,000 and the total estimated returns will be Rs 1,36,28,237.
Conclusion
Here, we observe that at Rs 35,000 monthly investment for 16 years, the money invested is more than Rs 52,50,000 more than the amount invested in Rs 3,500 monthly SIP investment for 35 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.