₹5,000 SIP for 30 Years vs ₹15,000 SIP for 20 Years: Which Can Build a Bigger Corpus?

Investing consistently over time is a key principle in wealth creation. While a larger monthly investment seems like the obvious choice for accumulating wealth, the duration of investment plays a significant role in determining the final corpus. The question is: which strategy builds more wealth—a ₹5,000 monthly SIP for 30 years or a ₹15,000 monthly SIP for 20 years?

The answer lies in the concept of compounding. The longer an investment stays invested, the more it benefits from compound growth, where returns are reinvested to generate further earnings.

Understanding Compound Growth

Compound interest ensures that an investor earns returns not just on their principal amount but also on previous gains. For instance, if ₹1 lakh is invested in a mutual fund with an annual return of 12%, it will generate ₹12,000 in the first year. However, in the 2nd year, returns will be calculated on ₹1,12,000 instead of just ₹1 lakh, and so on.

Over time, this compounding effect accelerates wealth accumulation. The longer the tenure, the more pronounced the impact of compounding.

Corpus from a ₹5,000 Monthly SIP for 30 Years

• Total Investment: ₹18,00,000
• Estimated Capital Gains: ₹1,58,49,569
• Estimated Corpus: ₹1,76,49,569

By investing ₹5,000 every month for 30 years, the extended time frame allows the investment to compound significantly, resulting in a corpus of ₹1.76 crore. The output is derived from this calculator. 

Corpus from a ₹15,000 Monthly SIP for 20 Years

• Total Investment: ₹36,00,000
• Estimated Capital Gains: ₹1,13,87,219
• Estimated Corpus: ₹1,49,87,219

Although the investment amount is three times higher, the shorter tenure reduces the impact of compounding, leading to a lower corpus of ₹1.49 crore.

Why a Smaller SIP Over a Longer Tenure Wins

The comparison shows that a smaller SIP invested over a longer period can generate more wealth than a larger SIP for a shorter duration. This happens because:

1. Compounding Effect: Longer investment periods provide more time for compounding to work.
2. Lower Investment Burden: ₹5,000 per month is more manageable than ₹15,000, allowing consistent investing without financial strain.
3. Time Overcomes Market Volatility: A longer tenure helps mitigate short-term market fluctuations, averaging out returns.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.