Power of Rs 20,000 SIP: Can Rs 20,000 monthly investment lead to Rs 2.76 cr corpus in long term? Know how power of compounding will work
Power of Rs 20,000 SIP: If one invests Rs 20,000 monthly in an SIP for 5 years and lets the corpus grow for the long term, their corpus may grow to multiple crores. The power of compounding can multiply your corpus by many times if you stay in your investments for a long period.
Power of Rs 20,000 SIP: Do you envision creating a large corpus from a small investment amount? Does this possibility appear to be impossible to you? Do you think a large corpus is possible only with a large investment? If you think so, you are surely undermining the power of compounding and the investment duration. Both things are interrelated and can boost your investment to a corpus that will be multiple times higher. But it requires patience from the investor, an ability to withstand market fluctuations with ease. If one sticks to their investments for a long time, even a Rs 20,000 monthly SIP investment may lead to a Rs 2.76 crore corpus in the long term. Know how it may be possible –
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Power of compounding in investment growth
Compound growth is the return on return. It means you get a return not only on the principal amount invested but also on the return. So, the longer you stay in your investment, the higher the growth can be.
Examples of investment growth
Let's see the example of the Rs 7,500 monthly SIP investment. See that at a 12 per cent annualised return, what it may create in 11, 22, and 33 years.
In 11 years, the total investment will be Rs 9,90,000, estimated capital gains will be Rs 9,87,650 and the estimated corpus will be Rs 19,77,650.
Examples of investment growth
In 22 years, the total investment will be Rs 19,80,000, estimated capital gains will be Rs 68,77,005 and the estimated corpus will be Rs 88,57,005.
In 33 years, the total investment will be Rs 29,70,000, estimated capital gains will be Rs 2,98,17,186 and the estimated corpus will be Rs 3,27,87,186.
Just look at the growth in the last 11 years: the investment is Rs 9,90,000, but the estimated corpus growth is Rs 2,39,30,181.
Power of compounding examples for one-time investment
Now, see how a one-time investment can grow because of the power of compounding.
A person invests Rs 6,00,000 in a mutual fund scheme, where they expect a 12 per cent annualised growth on their investment. Here's a breakdown of how it may grow in 10, 20, and 30 years.
Power of compounding examples for one-time investment
In 10 years, estimated capital gains will be Rs 12,63,509, while the estimated corpus will be Rs 18,63,509.
In 20 years, estimated capital gains will be Rs 51,87,776, while the estimated corpus will be Rs 57,87,776.
Power of compounding examples for one-time investment
In 30 years, estimated capital gains will be Rs 1,73,75,953, while the estimated corpus will be Rs 1,79,75,953.
Here, also, just look at the growth from 20 to 30 years; the corpus has grown by Rs 1,21,88,177 on the same investment.
How investment will grow without fresh investment
Now, see the second condition: you want to invest Rs 15,000 a month in an SIP for 5 years, but you don't want that money after 5 years and can let it grow for another 25 years. Let's see how it may grow!
In 5 years, investment will be Rs 9,00,000, estimated capital gains will be Rs 3,16,554, and the estimated corpus will be Rs 12,16,554.
How investment will grow without fresh investment
Now what if we stop investing and let the corpus grow for 25 years!
In 25 years, estimated capital gains will be Rs 1,94,64,942, and the estimated corpus will be Rs 2,06,81,496.
That's the beauty of investment. Even if you stop investing and let it grow, it will keep increasing because of the power of compounding.
Calculations for story
Our calculations for the story will be in 2 phases. In the 1st phase, we will show the corpus created from a Rs 20,000 monthly SIP investment. In the second phase, we will show what will happen if the investor stops investing and lets the corpus grow for another 25 years.
Corpus building from Rs 20,000 monthly SIP investment
In 5 years, the total investment will be Rs 12,00,000, estimated capital gains will be Rs 4,22,072, and the estimated corpus will be Rs 16,22,072. Now at this stage, we are not withdrawing this money and letting it grow for another 25 years.
Corpus from Rs 16,22,072 amount in 25 years
In 25 years, estimated capital gains will be Rs 2,59,53,256, and the estimated corpus will be Rs 2,75,75,328.
Disclaimer
(This is not investment advice. Do your own due diligence or consult an expert for financial planning.)