Can Rs 50 More a Month Grow Into Nearly Rs 1 Lakh? This SIP Calculation Will Surprise You

We’ve all been told for many years that wealth accumulation consists of saving a few more thousand rupees each month! The truth about real wealth accumulation may perhaps lie in consistency rather than large investment sums over a long period.

Imagine this. You cut down on one packet of chips, skip a couple of cups of tea or avoid one impulse buy of Rs 50 every month. It doesn’t feel much like a sacrifice. But the same Rs 50 becomes an enormous amount over years when added to your monthly Systematic Investment Plan (SIP).

That is the magic of compounding. A little more each month in your investment can lead to a significant difference over decades of investing.

Let’s illustrate this using a SIP calculator to demonstrate the variation in your maturity value on your Rs. 50 additionally every month.

SIP Of Rs 5,000 And Rs 5,050: What’s The Difference?

Let’s say two investors start to invest at the same time. Both stay invested for 25 years, earning an assumed annual return of 12%. The only difference is one invests Rs 5,000 every month, while the other invests Rs 5,050.

What Do You Get For That Extra Rs 50 Investment?

Rs 50 doesn’t sound like much money at first glance. This is Rs 15,000 more over 25 years. But due to the effect of compounding, the estimated final corpus increases by Rs 94,882.

Here’s how they stack up:

• Additional Monthly SIP: Rs. 50
• Additional investment over 25 years = Rs 15,000.
• The corpus is to be increased by Rs 94,882 in the end

That is to say, an extra investment of Rs 15,000 over 25 years could potentially add almost Rs 95,000 to wealth at the assumed return.

How Can Such a Small Amount Grow So Much?

The answer is compounding.

You earn returns on your SIP instalments every month. The returns are then reinvested and begin to generate their own returns. And this cycle continues year in year out.

The earlier you put the money in, the longer it stays in the market and the more chances it has to grow. That’s why small additions, if consistently made over a long period of time, can lead to results far greater than the original investment.

Like you plant a tree, you know? The seed is small, but it grows into something much larger. If allowed to compound for decades, investments behave in a similar way.

Why Increasing SIPs Gradually Makes Sense

Even after salary hikes, many investors continue to invest the same SIP amount for years. Most financial planners suggest reviewing your SIP from time to time and increasing the SIP amount as your income grows.

For example, if you get an annual hike in your salary, then increasing your SIP by Rs 100 or Rs 500 every month is unlikely to put pressure on your monthly budget. However, these small increases can boost your investment value significantly in the long run. This is called the ‘step-up SIP’ technique, a move in which you steadily raise your monthly investment as opposed to taking a sudden big leap.

The key benefit is that you can continue to invest as your income grows, while not dramatically changing your lifestyle.

Small Changes Can Make Big Results

Long-term investing isn’t only about making huge financial moves. And sometimes it is about making small decisions and standing by them.

Someone who starts investing early and increases his SIP modestly every few years is likely to have a larger corpus than someone who starts investing later and contributes a much larger amount.

The secret is consistency. The benefit of compounding over a period of time can be lost if you skip investments or pause and restart SIPs frequently.

Things Investors Should Remember

SIPs are a wonderful way to invest in mutual funds but they don’t assure returns. This example assumes 12% return per year for demonstration purposes only to demonstrate the power of compounding. Actual returns depend on market performance and may be higher or lower.

Similarly, investors should pick mutual fund schemes considering their financial goals, investment horizon and risk appetite and not merely based on expected returns.

Can Saving Rs 50 More Per Month Help You Build Your SIP Corpus?

Today an extra Rs 50 a month may not seem worth thinking about. But if you invest regularly through a SIP and give that small amount time to compound over a period of time, it can be a meaningful addition to your wealth.

In this example, by investing Rs 50 more a month, you end up investing Rs 15,000 more over 25 years. But the estimated corpus grew by nearly Rs 95,000 because every extra rupee had years to earn the power of compounding.

The lesson is simple: You don’t always need to take a big leap to build wealth. Sometimes it takes one small step, consistently, month after month.

(Disclaimer: This article is for informational purposes only and should not be considered investment advice. The views, opinions, and recommendations expressed herein are those of the respective experts. Readers are advised to consult a qualified financial advisor before making any investment decisions.)

Also Read: Should You Withdraw Your EPF to Invest in Mutual Funds? Here’s What EPFO Says About It

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