Mutual Funds SIP — Why Start Early

The best time to start a Mutual Fund SIP was yesterday. If you missed it then the next best time is today. Today I will show you a Mutual Fund SIP example that really shows the magic of compounding.

The idea is to show why you should start investing at an early age. Let’s say you started investing Rs. 12,000 per year in a Mutual Fund SIP plan at the age 20 and stopped it when you turned 30. So you invested Rs. 12,000 per year for 10 years and your total investment is Rs. 120,000.

When you stopped your SIP, one of your friends started a SIP. Since he started at the age 30, he continued his SIP investment until age 60 (or for 30 years). So he invested Rs. 12,000 per year for 30 years and his total investment is Rs. 360,000 (or he invested 3 times more money than you did).

So who is going to have more money at age 60? You or your friend? The answer may surprise you because YOU will have 3x more money than your friend. In fact, if your friend wants to beat your corpus then he should increase his SIP by almost 3 times.

Here’s the math:

In the above example, I applied a CAGR of 14% as Nifty 50/Sensex long term average return is around 14-16%. But there’s a very little chance of our market growing at the same pace as it did in the past 30 years.

However, individual stocks and portfolios could perform better than that. Anyhow, if you are thinking about starting a Mutual Fund SIP (or a Nifty ETF SIP) then now is the best time. But there’s a Onevestor thing. Your time horizon should be at least 15 years (Stay tuned to Onevestor to know why!).

Video / Malayalam

I hope you have learned a thing or two from my new video. If so, do share my video with your friends and family on your social media channels!

Happy Investing/Trading! 🙂