Why A 10% SIP Return Can Create More Wealth Than A 14% Return
For most investors, investment decisions revolve around one factor returns. The focus is always on which fund delivered the highest performance or which strategy beat the market. However, over long periods, this obsession often hides a more important truth: returns are uncertain, but the amount you invest is fully within your control.
This becomes clear when comparing two systematic investment plans (SIPs) over a long investment horizon.
Consider two investors who both start with a SIP of ₹5,000 per month and stay invested for 20 years. In the first case, the investor keeps the SIP amount unchanged throughout the period and earns an annual return of 14%. In the second case, the investor earns a lower annual return of 10%, but increases the SIP contribution by 10% every year.
At first glance, the higher-return option appears superior. Yet, despite earning lower returns, the second investor ends up with a larger final corpus nearly ₹15 lakh more. The reason is simple: consistent increases in investment contributions compound just as powerfully as returns do.
Now consider another scenario. If the investor not only increases the SIP by 10% annually but also earns a 14% return, the final corpus grows sharply to around ₹1.13 crore over 20 years. This shows that while returns help accelerate growth, it is the rising investment amount that creates the base on which compounding works.
Many investors argue that the larger corpus comes only because more money was invested. That observation is correct and it is also the key takeaway. Market returns fluctuate and remain outside an investor’s control, but increasing SIP contributions is a deliberate and repeatable action.
A gradual step-up in SIP investments aligns naturally with income growth over time. It reduces the pressure to chase high-performing funds every year and allows wealth to build steadily without relying on aggressive return assumptions.
In the long run, wealth creation depends less on finding the perfect investment and more on maintaining discipline and increasing participation. A modest annual increase in SIP contributions may seem insignificant initially, but over time, it can make a substantial difference to the final corpus.
This becomes clear when comparing two systematic investment plans (SIPs) over a long investment horizon.
Consider two investors who both start with a SIP of ₹5,000 per month and stay invested for 20 years. In the first case, the investor keeps the SIP amount unchanged throughout the period and earns an annual return of 14%. In the second case, the investor earns a lower annual return of 10%, but increases the SIP contribution by 10% every year.
At first glance, the higher-return option appears superior. Yet, despite earning lower returns, the second investor ends up with a larger final corpus nearly ₹15 lakh more. The reason is simple: consistent increases in investment contributions compound just as powerfully as returns do.
Now consider another scenario. If the investor not only increases the SIP by 10% annually but also earns a 14% return, the final corpus grows sharply to around ₹1.13 crore over 20 years. This shows that while returns help accelerate growth, it is the rising investment amount that creates the base on which compounding works.
Many investors argue that the larger corpus comes only because more money was invested. That observation is correct and it is also the key takeaway. Market returns fluctuate and remain outside an investor’s control, but increasing SIP contributions is a deliberate and repeatable action.
A gradual step-up in SIP investments aligns naturally with income growth over time. It reduces the pressure to chase high-performing funds every year and allows wealth to build steadily without relying on aggressive return assumptions.
In the long run, wealth creation depends less on finding the perfect investment and more on maintaining discipline and increasing participation. A modest annual increase in SIP contributions may seem insignificant initially, but over time, it can make a substantial difference to the final corpus.
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