Rs 150 Daily SIP vs Rs 4,500 Monthly SIP: Which investment can generate higher returns in 15, 25, and 35 years? See calculations
Rs 150 Daily SIP vs Rs 4,500 Monthly SIP: In a systematic investment plan (SIP) method, investors get an option to invest daily, monthly, quarterly, half-yearly, or yearly. They can pick the investment cycle based on their income cycle.
Rs 150 Daily SIP vs Rs 4,500 Monthly SIP: One can't invest lifelong. The best time to invest is when someone is earning a regular income. The investment horizon for a working person can be 30 years or slightly above it. One needs to achieve all their financial goals by investing money earned during this period. For a person with a regular income, the best way to invest is to adjust the investing cycle to their earning cycle. Individuals with daily income may opt for daily investment, those with a weekly billing cycle may go for weekly, and salaried class individuals with a monthly salary may choose a monthly investment option. Likewise, mutual fund investors can also pick the systematic investment plan (SIP) cycle as per their income cycle. Know how SIP works, what are different SIP options; how compounding works in a SIP investment, and which of the 2- a Rs 150 Daily SIP investment or a Rs 4,500 monthly SIP investment- can generate a higher corpus in 15, 25, and 35 years.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
What is a SIP?
Systematic Investment Plan (SIP) is a way to invest in mutual funds. The other method is lump sum. In an SIP investment, an investor invests in a mutual fund scheme periodically. They can choose the investment cycle as per their earning cycle. SIPs in many mutual fund schemes start from Rs 100. A lot of funds have Rs 500 as the minimum SIP investment.
What are different durations of SIPs?
SIPs can be daily, weekly, monthly, quarterly, half-yearly, or yearly.
How SIP investment grows
In every SIP investment, an investor buys net asset value (NAV) at different prices. In some cycles, they buy units at a higher rate, in some at a lower rate. The price may fluctuate, but in the long run, SIP investment is most likely to give positive returns.
Will SIP investment always be positive?
If an investor makes an SIP in an equity fund and the share market is spiralling downwards for years, SIP returns can also be negative for those years. But since the market fluctuates and often recovers after a slump. With that, SIP investment also turns positive. The investment is suitable for investors with a long-term investment horizon.
Who can make daily SIP?
Everyone can start a daily SIP, but it is more suitable for people who are daily wage earners, or who have daily earnings through their business, daily gigs, etc. A daily SIP amount deduction from their daily earnings won't pinch them more than a monthly deduction.
Monthly SIP investment
Since the earning cycle for most people, especially the salaried class, is monthly, a monthly SIP is the most popular option among mutual fund investors.
Compound growth
SIP investment provides compound growth where investments most likely grow faster with time. E.g., if one starts a Rs 11,000 monthly SIP and gets a 12 per cent annualised return on their investment, here's how much corpus they may generate in 10, 20, and 30 years.
In 10 years, the total investment will be Rs 13,20,000, and the estimated corpus will be Rs 25,55,730.
In 20 years, the total investment will be Rs 26,40,000, and the estimated corpus will be Rs 1,09,90,627.
In 30 years, the total investment will be Rs 39,60,000, and the estimated corpus will be Rs 3,88,29,052.
You can see that the corpus is growing faster with time. It's because compounding shows its impact more in the long term.
Calculation for the story
We will take the example of a Rs 150 daily SIP investment for 15, 25, and 35 years and show the corpus created in those durations at a 12 per cent annualised return. In the second example, we will show the corpus created from a Rs 4,500 monthly SIP investment in 15, 25, and 35 years at an annualised 12 per cent rate of return.
Here, the number of days in a year for a daily SIP will be 365 irrespective of the leap year.
On the other hand, a month will be calculated at 30 days, or 360 days year. This is the reason there will be a difference in the corpus created in the long run.
Corpus created from Rs 150 daily SIP in 15 years
In 15 years, the total investment will be Rs 8,21,250, estimated capital gains will be Rs 14,82,592, and the estimated corpus will be Rs 23,03,842.
Corpus created from Rs 150 daily SIP in 25 years
In 25 years, the total investment will be Rs 13,68,750, estimated capital gains will be Rs 73,37,370, and the estimated corpus will be Rs 87,06,120.
Corpus created from Rs 150 daily SIP in 35 years
In 35 years, the total investment will be Rs 19,16,250, estimated capital gains will be Rs 2,80,41,990, and the estimated corpus will be Rs 2,99,58,240.
Corpus created from Rs 4,500 monthly SIP in 15 years
In 15 years, the total investment will be Rs 8,10,000, estimated capital gains will be Rs 14,60,592, and the estimated corpus will be Rs 22,70,592.
Corpus created from Rs 4,500 monthly SIP in 25 years
In 25 years, the total investment will be Rs 13,50,000, estimated capital gains will be Rs 71,89,358, and the estimated corpus will be Rs 85,39,358.
Corpus created from Rs 4,500 monthly SIP in 35 years
In 35 years, the total investment will be Rs 18,90,000, estimated capital gains will be Rs 2,73,38,711, and the estimated corpus will be Rs 2,92,28,711.