Investing ₹3,500 per month in SIP can grow your corpus over ₹3.09 crore in the long term. We calculate how

When it comes to investing, there is no bigger benefit than starting as soon as possible. Time rather than big amounts is what helps build your monthly contributions into a significant corpus, where even a delay of five years can make a big difference to the final accumulated amount.

Today, we calculate how an investment of ₹3,500 per month in systematic investment plans (SIPs), can grow your corpus over ₹3.09 crore over a period of 30 years.

How ₹3,500/month grows into over ₹3.09 crore, explained

We will calculate the investment over a period of 30 years, with 12% p.a. rate of return and 10% annual step up in investment amount.

This means that for the first year, assuming you begin at age 25, ₹3,500 is invested each month, and the next year, at age 26, you increase the amount by 10% ( ₹350) to ₹3,850/month for the year. Then at age 27, you increase the amount again by 10% ( ₹385) to ₹4,235/month and continue this pattern for the 30-year tenure.

Through this method, you will have invested more than ₹69.09 lakh and generated estimated returns of over ₹2.40 crore. Thus, starting with monthly investment of ₹3,500/month at age 25, with 12% p.a. and 10% annual step up, accumulates over ₹3.09 crore for you at the end of 30 years, aged 55.

Why choose step-up method, start early?

The key factor for investments is to start early and stay for long term to make the most of the power of compounding. For example, a delay of five years, where you invest the same ₹3,500 for 25 years at 12% p.a. and annual step up of 10%, generates over ₹1.49 crore for you — nearly half the amount, despite all other conditions being the same!

And why step up method? Because it allows you to gradually increase your SIP investment amount alongside your salary. For the earlier years, it allows you to put in smaller amounts based on comfort and in the presumable better earning years, increase your investment amounts to meet financial goals.

In comparison, someone choosing to invest flat ₹5,000/month in SIPs for a period of 30 years, at 12% rate of return will generate corpus of over ₹1.54 crore (including cumulative investment of ₹18 lakh and estimated returns of over ₹1.36 crore).

How do SIPs work?

For an SIP, you can put standing instructions in place with your bank and automate monthly or fortnightly (12 or 6) debits towards selected schemes, as per your choice. Investing through an SIP means that your purchase units of a mutual fund each time you invest. For e.g. for each unit costing ₹10, an investment of ₹1,000/month gets you 100 units.

However, since prices fluctuate as per market performance, your units can cost most or less depending on increase or decrease in price per unit. Overall, starting early also spreads out of your required investment amount over a long period of time and averages your cost of purchase, when compared to lumpsum investment.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.