Systematic investment plan, or SIP, is the new darling of the Indian middle class. After scaling dizzy heights till September 2024, the Indian stock market has slipped into a correction mode and is now passing through significant volatility. However, the faith of the Indian investor in mutual fund SIPs has reached such a degree that there is continuous rise in the monthly SIP inflow figures and number of folios, as evident from the AMFI (Association of Mutual Funds in India) data. In December 2024, SIP inflow touched Rs 26,459 crore marking the first breach of the Rs 26,000 crore barrier.
However, merely beginning to invest in SIPs is not enough. You have begin early for better gains. But how early can you begin to invest? You can start investing from the month you start earning. Or, if you regularly get a significant amount of pocket money, you can even start putting aside a part of it for SIP. The sooner you can start putting your money in SIP, the better.
See the calculation with Cost of Delay calculator
Let’s take the example of two youths. Both invests a modest amount of Rs 5,000 every month in SIP. One begins it at the age of 22 (say the age at which he/she begins to earn), while the other begins to invest at the age of 30 years. Both continue investing till the age of 60, when they retire and stop earning a salary. For the sake of simplicity, we assume that both invests the same amount throughout the entire period.
The first person, who begins investing from the age of 22 years, ends up accumulating an amount of Rs 2.58 crore from this SIP only. He/she invests for 38 years. But the second person, who begins to invest the same amount 8 years later, ends up accumulating only Rs 1.13 crore. Therefore, the difference in final value of the SIP kitty is nothing less than Rs 1.45 crore. Which means the person who starts out 8 years earlier makes more than double of what the latter one makes.
“While most investors know, in a somewhat vague way, that one can create a bigger corpus of money with relatively less difficulty if one begins investing early, most have no idea what a huge difference can happen to the fortunes of a person by beginning to invest a few years early. Viewed from another perspective, one can build the same eventual kitty by investing a smaller amount in SIP by beginning earlier,” investment strategist and director, Wishlist Capital, Nilanjan Dey told News9live. This calculation can be easily done with the help of a Cost of Delay calculator which is available online free of cost.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds and crypto assets.)
SIPs in mutual funds have emerged as the preferred investment instrument for a huge section of the Indian middle class. Despite the correction and volatility, the amount of inflow into mutual funds through the SIP route is increasing every month. However, beginning your investment journey is the mantra to follow since you will miss out on huge gains if you begin even a few years late. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
