Rs 5,500 Monthly SIP for 35 Years vs Rs 55,000 Monthly SIP for 15 Years: Which can give you higher corpus in long term? See calculations
Rupee cost averaging in SIP: 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.
SIP (systematic investment plan) is an investment plan to invest a small amount in mutual funds regularly. Instead of investing a large amount at one time, you can choose to invest weekly, monthly, quarterly, half-yearly, or yearly. Before starting an SIP, an investor should decide their goal. This can be for retirement, education buying a car or house, or for any other purpose. You should also decide the duration of your SIP to fulfill your financial goals. One of the best things about SIP is it can make you a disciplined investor and you can also take the benefit of compound interest.
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Power of compounding
Because of compound interest, your money can grow multiple times over some time. This is calculated on the principal and the interest accumulated over the previous period.
Market knowledge
To invest in an SIP, you don't need to have too much market knowledge.
How much-estimated returns you can get in SIP investment?
You can get around 12 per cent annual returns in SIP.
NAV in SIP
Nav (net asset value) represents a mutual fund's per share market value.
Rupee cost averaging in SIP
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.
How much amount 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 calculations
This article will compare two monthly SIP investments- Rs 5,500 monthly for 35 years and Rs 55,000 monthly for 15 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 5,500 monthly SIP investment in 35 years?
In 35 years, you can accumulate Rs 3,57,23,980 by investing Rs 5,500 per month. The total investment will be Rs 23,10,000 and the total estimated returns will be Rs 3,34,13,980.
What will be the corpus from Rs 55,000 monthly SIP investment in 15 years?
In 15 years, you can accumulate Rs 2,77,51,680 by investing Rs 55,000 per month. The total investment will be Rs 99,00,000 and the total estimated returns will be Rs 1,78,51,680.
Conclusion
Here, we observe that at Rs 55,000 monthly investment for 15 years, the money invested is more than the amount invested in Rs 5,500 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.