Mutual Fund SIP: How much corpus can you generate if you invest Rs 2,000 monthly for 25 years and Rs 20,000 monthly for 5 years? Check calculations

According to a PwC report, the number of unique mutual fund investors in India is predicted to increase by more than five times, from 4.5 crore to 26 crore by 2047, as the country strives for Viksit Bharat. The analysis emphasised the growing significance of mutual funds in wealth creation and financial inclusion, forecasting increased market participation and greater investor involvement in the future decades.

"The number of unique mutual fund investors is expected to grow from 4.5 crore to 26 crores during this period, with the average AUM per retail investor reaching INR 74 lakh," the report said.

Here are some benefits of SIP.

- Some of the mutual funds are eligible for deduction from taxable income under Section 80C of the Income Tax Act.

- Compounding in SIP works when you invest for a longer period.

- You have the flexibility option in SIP. It means once you start the SIP, you can change the pause and decrease or increase the amount of investment.

- Rupee cost averaging reduces the average cost of mutual funds. In reality, mutual fund SIPs increase returns by lowering average costs rather than increasing yields.

- SIPs can lower your risk of market volatility if you invest for a longer period. When the market is up, you will be allotted fewer units, and when the market is down, you will get a greater number of units. That way, your portfolio will be well-balanced.

- Now, let's see what can happen if you invest Rs 2,000 monthly for 25 years and Rs 20,000 monthly for five years.

Invest Rs 2,000 for 25 years

If you invest Rs 2,000 per month for 25 years, then you will be able to accumulate a corpus of Rs 34,04,413.

Understand with calculations

Total investment in 25 years: Rs 6,00,000

Estimated returns: Rs 28,04,413 (calculated at 12% p.a.)

Maturity amount: Rs 34,04,413

Invest Rs 20,000 for 5 years

Similarly, if you invest Rs 20,000 per month for five years, then you will be able to accumulate a corpus of Rs 16,22,072.

Understand with calculations

Total investment in 5 years: Rs 12,00,000

Estimated returns: Rs 4,22,072 (calculated at 12% p.a.)

Maturity amount: Rs 16,22,072

Conclusion

The examples shown above demonstrate the beauty of SIPs. This indicates that investing a lesser amount in SIPs might provide higher returns than investing a larger amount in a shorter period of time. Your investment will also be less over a longer period of time than it would be in a shorter period.

Investing in mutual funds is subject to market risks. Consult your advisor before making any investment.