Kolkata: The Sensex has dipped as much as 11,809 points or 13.73%, compared to the peak of 85,978, it reach in September 2024. It has not only cooled valuations of Indian equities but also brought down the NAVs (net asset value) of the equity mutual fund schemes and those schemes that invest even a part of the funds in equities. What’s more important is that there is growing unanimity among market analysts that the Indian equity market is close to bottoming out.
This gives to a nice opportunity to begin or step up investment in SIPs. Though classically one can begin SIPs in any market condition, beginning at a time when the NAVs are near their lows gives just a layer of additional returns when the market starts moving up again. “As we are moving closer to the bottom, it is becoming more and more appropriate for anyone to begin the mutual fund journey. This is the ideal time to begin one’s mutual fund journey both with lump sum as well as SIP modes of investment,” said investment strategist and director of Wishlist Capital, Nilanjan Dey.
What is Rs 10,000 SIP for 30 years
SIP has spectacularly demonstrated the power of compounding to the Indian investor. It is possible to invest a few thousand rupees every month in a mutual fund schemes to generate crores after a few patient decades. While the gulf between a thousand and a crore is huge and apparently unbridgeable — you have to multiply Rs 1,000 by 10,000 to get Rs 1 crore — if you can be patient and let the force of compounding take over for a few decades, it is not difficult to create a corpus of crores with a regular investment of a few thousands. Let’s take a concrete example.
Let an investor start working at the age of 25 years and let him/her invest Rs 10,000 a month in a couple equity-linked mutual funds. Since the investor in young and has a long investment horizon in front of him/her, let the investment continue for a good 30 years — till he/she turns 55. If we use an online (that come free as well) mutual fund SIP calculator, we get the following:
- Investment per month: Rs 10,000
- Expected return: 12%
- Time period: 30 years
- Invested amount: Rs 36,00,000
- Estimated returns: Rs 2,72,09,732
- Total value: Rs 3,08,09,732
SIP Calculator: Continuing SIP for 35 years
Let’s take the example of the above person and assume that he/she continues to invest till the age of 60 — ie, for 35 years. Since the force of compounding increases the corpus “disproportionately” higher as time passes, just increasing the investment tenure by 5 years can raise the total corpus to another level altogether. The results of the SIP calculator (assuming the same 12% return) will be the following:
- Investment per month: Rs 10,000
- Expected return: 12%
- Time period: 35 years
- Invested amount: Rs 42,00,000
- Estimated returns: Rs 5,09,08,311
- Total value: Rs 5,51,08,311
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals and crypto assets.)
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