Power of Rs 25,000 SIP: Can Rs 25,000 monthly SIP investment for 5 years generate Rs 3.44 cr corpus at retirement?

Power of Rs 25,000 SIP: When we talk about systematic investment plan (SIP) in mutual funds, we mostly talk about long-term planning.

Where one starts building their corpus through monthly investment, and in the long term, the same investment grows to a large corpus.

But long-term retirement planning is also a long-term investment commitment, where one needs to ensure the continued supply of money for regular investments.

There may be chances when the supply of investment may be interrupted due to a job loss or other reason.

Investments may come to a standstill. Is it possible to create a retirement corpus amid such a situation?

How one may use the power of compounding to create a large retirement corpus from a small monthly SIP investment just for a few years.

Is it possible to create a Rs 3.44 crore retirement corpus by making a Rs 25,000 monthly SIP investment for just 5 years? Know its possibility!

How power of compounding works

Once you make an investment, compounding starts.

If you make regular investments, compounding works on every periodic investment.

That's why a small investment increases to a large corpus.

Compounding works even when you stop making investments and just let the corpus grow as it happens in the lump sum investment.  

Power of compounding example

Let's take the example of a Rs 10,000 monthly SIP investment, where you do it for 10 years and then stop, but you do not withdraw the amount for another 20 years and let it grow.

What will the corpus be in 10 years and 30 years if it is growing at a 12 per cent annualised return?

In 10 years, the total investment will be Rs 12,00,000, estimated capital gains will be Rs 10,40,359, and the estimated corpus will be Rs 22,40,359.

The investment will remain the same, and for the next 20 years, this corpus will work as a lump sum investment.

In 30 years, estimated capital gains from the investment will be Rs 1,93,70,801, and the estimated retirement corpus will be Rs 2,16,11,160.

What if investment would have been for 30 years? 

In 30 years, the total investment would have been Rs 36,00,000, estimated capital gains would have been Rs 2,72,09,732, and the estimated corpus would have been Rs 3,08,09,732.

From Rs 25,000 monthly SIP investment to Rs 3.44 cr corpus 

This investment will have 2 stages. In the first stage, an investor will make a monthly Rs 25,000 SIP investment for 5 years.

In the second stage, there will be no investment, and the investor will let the corpus grow for 25 years.

Corpus from Rs 25,000 monthly SIP investment in 5 years

In 5 years, the total investment will be Rs 15,00,000, estimated capital gains will be Rs 5,27,590, and the estimated corpus will be Rs 20,27,590.

Total corpus generated in next 25 years

We will let the Rs 20,27,590 grow at a 12 per cent annualised return for the next 25 years.

In 30 years, estimated capital gains will be Rs 3,24,41,571 and the estimated corpus will be Rs 3,44,69,161.

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)