When it comes to investing, patience can often beat the urge to go big in a short span of time. Many investors believe that a higher monthly contribution will always lead to a bigger corpus, but that is
not always true. In fact, staying invested for a longer duration, even with a smaller SIP, can help you create much more wealth.
To put it simply, a SIP of Rs 15,000 for 20 years can generate a higher corpus than a SIP of Rs 20,000 for 15 years, even though the total money invested is the same. This is the magic of compounding; the longer your money stays invested, the harder it works for you.
Rs 15,000 for 20 years beats Rs 20,000 for 15 years
Let us look at the numbers. If you invest Rs 15,000 every month for 20 years at a 12 per cent annual return, you can build an estimated corpus of Rs 1.38 crore.
Now compare this with Rs 20,000 invested every month for 15 years at the same 12 per cent return. The expected corpus here is Rs 96 lakh. Even though the total investment in both cases is Rs 36 lakh, the 20-year SIP generates Rs 42 lakh more, which is around 44 per cent extra wealth.
So, the key takeaway is that the extra five years make a massive difference. For a 30-year-old investor, continuing a Rs 15,000 SIP till the age of 50 can result in a corpus that is 1.44 times higher than what a Rs 20,000 SIP for 15 years would deliver.
Why staying invested longer makes such a big difference
The reason behind this gap lies in compounding. The longer your investment stays, the more time it gets to multiply. Even a few extra years can lead to a huge jump in the final amount.
For example, if you invest Rs 5 lakh for 15 years at 12 per cent returns, you might build a corpus of around Rs 28 lakh. But if you continue for just five more years, the same investment grows to Rs 49 lakh. That is an additional Rs 21 lakh in only five years, without adding a single extra rupee. This is the power of compounding in action.
Market ups and downs don’t matter in the long run
It is also important to remember that market-linked investments like mutual funds will go through ups and downs. Sometimes your portfolio might even show negative returns for a while.
But over the long run, equity markets have historically delivered strong returns, making them one of the best options for wealth creation.
For instance, as of August 26, this year, the 10-year return for large-cap mutual funds stood at 12.79 per cent per year, according to Value Research. While this doesn’t guarantee future performance, it shows that such returns are realistic if you stay invested and manage expectations.
The importance of consistency and stepping up investments
Consistency is the backbone of SIPs. Even if you don’t increase your SIP amount over time, staying disciplined for a long period can still generate impressive wealth. However, it is always wise to step up your SIP with your income growth. This not only boosts your investment capacity but also ensures your money keeps pace with inflation.
In short, whether you start with a small SIP or a bigger one, the real secret is how long you stay invested. A longer horizon can turn even modest contributions into a large corpus, while cutting the duration short may cost you big.
