Small SIP, Big Impact: Rs 11,111 monthly investment for 15 years, Rs 22,222 for 10 years or Rs 33,333 for 7 years, which do you think works better?
A Systematic Investment Plan (SIP) is a popular way to invest in mutual funds, as it allows investors to gradually park their balance in a mutual fund scheme of their choice. This helps the investor to not only commit to his long-term investment strategy but also maximize the compounding benefit. For consistent individuals, compounding increases investments consistently over time, helping to create more wealth over the years. Sometimes, combining produces amazing results, especially in the long run. In this article, let’s consider three scenarios to understand how time matters in compounding: a monthly SIP of Rs 11,111 for 15 years, Rs 22,222 for 10 years and Rs 33,333 for 7 years.
Can you predict the difference in the result in all three cases at an expected annual return of 12 percent?
SIP Return Rates | Which one will you choose: Rs 11,111 monthly investment for 15 years, Rs 22,222 for 10 years or 33,333 for 7 years?
Scenario 1: Rs 11,111 monthly SIP for 15 years
Calculations show that at a return of 12 percent per annum, a monthly SIP of Rs 11,111 for 15 years (180 months) will result in a corpus of around Rs 56.06 lakh (principal of around Rs 20 lakh and an expected return of -Rs 36.06 lakh ).
Scenario 2: Rs 22,222 monthly SIP for 10 years
Similarly, for the same expected return period, a monthly SIP of Rs 22,222 for 10 years (120 months) will accumulate wealth of Rs 51.63 lakh, as calculated (principal of Rs 26.67 lakh and expected return of Rs 24.97 lakh ).
Scenario 3: Rs 33,333 monthly SIP for 7 years
Similarly, for the same expected return period, a monthly SIP of Rs 33,333 for 7 years (84 months) will accumulate a wealth of Rs 43.99 lakh, as calculated (a principal of around Rs 28 lakh and an expected return of Rs 15.99 lakh).
Now, let’s look at these rates in detail (figures in rupees):
Power of Integration | Scenario 1
| Time (in years) | Investment | Come back | The Corpus |
| 1 | 1,33,332 | 8,992 | 1,42,324 |
| 2 | 2,66,664 | 36,035 | 3,02,699 |
| 3 | 3,99,996 | 83,417 | 4,83,413 |
| 4 | 5,33,328 | 1,53,719 | 6,87,047 |
| 5 | 6,66,660 | 2,49,846 | 9,16,506 |
| 6 | 7,99,992 | 3,75,074 | 11,75,066 |
| 7 | 9,33,324 | 5,33,095 | 14,66,419 |
| 8 | 10,66,656 | 7,28,066 | 17,94,722 |
| 9 | 11,99,988 | 9,64,674 | 21,64,662 |
| 10 | 13,33,320 | 12,48,199 | 25,81,519 |
| 11 | 14,66,652 | 15,84,593 | 30,51,245 |
| 12 | 15,99,984 | 19,80,560 | 35,80,544 |
| 13 | 17,33,316 | 24,43,655 | 41,76,971 |
| 14 | 18,66,648 | 29,82,392 | 48,49,040 |
| 15 | 19,99,980 | 36,06,364 | 56,06,344 |
Power of Integration | Scenario 2
| Time (in years) | Investment | Come back | The Corpus |
| 1 | 2,66,664 | 17,985 | 2,84,649 |
| 2 | 5,33,328 | 72,070 | 6,05,398 |
| 3 | 7,99,992 | 1,66,835 | 9,66,827 |
| 4 | 10,66,656 | 3,07,438 | 13,74,094 |
| 5 | 13,33,320 | 4,99,692 | 18,33,012 |
| 6 | 15,99,984 | 7,50,149 | 23,50,133 |
| 7 | 18,66,648 | 10,66,189 | 29,32,837 |
| 8 | 21,33,312 | 14,56,131 | 35,89,443 |
| 9 | 23,99,976 | 19,29,347 | 43,29,323 |
| 10 | 26,66,640 | 24,96,399 | 51,63,039 |
Power of Integration | Situation 3
| Time (in years) | Investment | Come back | The Corpus |
| 1 | 3,99,996 | 26,977 | 4,26,973 |
| 2 | 7,99,992 | 1,08,106 | 9,08,098 |
| 3 | 11,99,988 | 2,50,252 | 14,50,240 |
| 4 | 15,99,984 | 4,61,157 | 20,61,141 |
| 5 | 19,99,980 | 7,49,538 | 27,49,518 |
| 6 | 23,99,976 | 11,25,223 | 35,25,199 |
| 7 | 27,99,972 | 15,99,284 | 43,99,256 |
SIP & Compounding | What is compounding and how does it work?
For simplicity, one can understand compounding in SIPs as ‘rolling back’, where initial returns are added to the principal to improve future returns, and so on.
Compounding helps generate a return on both the original principal and the interest that accrues gradually over time, contributing to exponential growth in the long term.
This approach eliminates the need to invest in lump sums, making it easier for many people—especially high earners—to invest in their favorite mutual funds.
ALSO READ: Small SIP, Big Impact: Rs 1,111 monthly SIP for 40 years, Rs 11,111 for 20 years or Rs 22,222 for 10 years, which do you think works better?
Learn more about the power of integration
