Starting SIP 5 years later can reduce corpus by ₹81 lakh—Here's how much you can get over 30 years with ₹5,000/month

A Systematic investment plan (SIP) is a realistic and long-term option for most retail investors to build a significant corpus in mutual funds. An SIP allows investors to deduct a fixed amount into your preferred mutual fund scheme each month and also helps build financial discipline for the long run.

When you invest in a mutual fund scheme, the returns keep getting added to the corpus, thus letting it grow faster in the later years vis-a-vis initial years. The overall corpus, therefore, jumps at a rate faster than it did in the first few years. The faster pace of growth of a scheme's AUM in the later years is also known as 'compounding'.

In fact, delaying SIPs by 10 or even five years can have significant impact on your final corpus — a difference of over ₹81 lakh in the final value! A key factor here is to start early and remain invested for extended period in order to make the most of your investment.

How do SIPs work?

For an SIP, you can put standing instructions in place with your banks and automate monthly or fortnightly (12 or 6) debits towards selected schemes, as per your choice. Investing through an SIP means that your purchase units of a mutual fund each time you invest. For e.g. for each unit costing ₹10, an investment of ₹1,000/month gets you 100 units.

However, since prices fluctuate as per market performance, your units can cost most or less depending on increase or decrease in price per unit. Overall, spreading out of your investment over a long period of time averages out your cost of purchase, when compared to lumpsum investment.

How much you can get over 30 years for ₹5,000/month?

The below investors, all set to retire in 2045 have chosen to allocate ₹5,000 per month in SIPs till retirement with 12% rate of return. The only difference is the tenure of investment. The loss of corpus demonstrates the power of compounding.

• Priya chose to invest ₹5,000 per month in SIPs for a period of 30 years starting in 2015, at 12% rate of return, at end of term, her corpus will have reached ₹1.76 crore. This includes investment of ₹18 lakh (cumulative) and returns of ₹1.58 crore.

• However, Priyanka began investing the same amount ₹5,000 per month in 2020, for a period of 25 years. At 12% rate of return, her corpus is ₹94.88 lakh, including investment of ₹15 lakh (cumulative) and returns of ₹79.88 lakh. Just a difference of five years can lose you over ₹81 lakh.
• Latha, who delayed the same investment of ₹5,000 per month by 10 years and began in 2025 will see final corpus of ₹49.95 lakh at end of 20 years. At 12% rate of return, her cumulative investment of ₹12 lakh will return ₹37.95 lakh by 2045. The loss here is ₹1.26 crore with 10 years difference!

In fact, to catch up to Priya's growth, Latha would have to increase her monthly SIP investment to ₹18,000 per month for 20 years at 12% returns to gain a final corpus of ₹1.79 crore. This shows that starting early is the most important if you want to build wealth using SIPs and mutual funds.

When should you choose SIP investment?

• For early-stage investors with no large or significant sum of capital to invest upfront.

• If you have the time and patience to invest over a longer-term of 10-15 years
• For investors with regular salary, who can set up auto-debits for contributions and increase their investment in line with salary hike
• For investors looking for better returns compared to traditional fixed deposits and savings accounts.
• For investors looking to supplement their retirement fund.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.