What is the use of money? It is here today and gone tomorrow. ‘Money is just dirt on the hands’ – you must have heard such things often. While these idioms may underestimate the importance of money, everyone knows that if there’s one thing in this world whose importance cannot be denied, it’s money. Therefore, it is crucial to make money not just for today but for the future. You never know when inflation will eat up your savings.
Investing Through SIP: Which Option Gives Better Returns?
Investing is one of the best ways for a salaried person to grow wealth. Equity-linked mutual funds are considered one of the best options. They are relatively safe and offer good returns. In an SIP (Systematic Investment Plan), you invest a fixed amount every month, and over time, your money compounds into a large sum.
But which SIP gives better returns? A long-term SIP with a smaller amount or a short-term SIP with a higher amount? Today, we will compare two scenarios:
- A SIP of ₹5,000 for 30 years
- A SIP of ₹15,000 for 10 years
For both cases, we will assume an average annual return of 8.5%.
SIP of ₹5,000 for 30 Years
- Total amount invested: ₹18,00,000
- Estimated returns: ₹65,11,991
- Total value after 30 years: ₹83,11,991
SIP of ₹15,000 for 10 Years
- Total amount invested: ₹18,00,000
- Estimated returns: ₹10,42,066
- Total value after 10 years: ₹28,42,066
Which SIP Is More Profitable?
A ₹5,000 SIP for 30 years gives a profit of more than ₹65 lakh, whereas a ₹15,000 SIP for 10 years gives only about ₹10 lakh in profit. Even if you increase the SIP to ₹30,000 for 10 years, the total amount would be around ₹57 lakh, which is still less than the 30-year SIP.
Start Early for Better Returns
In Conclusion, we can say the key takeaway is that starting a SIP early and staying invested for a long time is more beneficial. Even with a smaller monthly amount, long-term SIPs generate much higher returns due to compounding. It is always advisable to start SIP as soon as possible with guidance from an investment advisor.