₹100 SIP For 30 Years Or ₹500 For 15? Returns Compared

Systematic Investment Plans (SIPs) remain a popular route for building long-term wealth, especially for individuals seeking consistent and disciplined investing. Mutual funds now allow investors to start SIPs with amounts as low as ₹100, making it accessible for all income groups. But does a smaller daily SIP over a longer duration build a better corpus than a higher SIP over a shorter period? According to experts, the compounding frequency and tenure of investment significantly influence the final corpus. This article explores and compares how a ₹100 daily SIP for 30 years fares against a ₹500 daily SIP for 15 years.

SIP Frequencies and Compounding Explained

SIPs are flexible in terms of frequency—daily, weekly, monthly, quarterly, half-yearly or yearly. The choice of frequency not only depends on one’s cash flow but also influences the compounding effect. In general, the more frequent the investment, the higher the compounding advantage, assuming all other conditions remain constant.

For instance, a daily SIP gives you 365 contributions in a year, whereas a monthly SIP gives 12. Yearly SIPs have the least compounding frequency. This means that even with equal total investment amounts, the corpus at maturity may differ depending on how often you invest.

Daily vs Monthly vs Yearly SIP Returns

Let us consider an example where the total yearly investment is the same across all SIP types. A daily SIP of ₹147.94, a monthly SIP of ₹4,500, and an annual SIP of ₹54,000 are all equivalent in total annual contribution.

Over 20 years at a 12% annualised return, here’s how the corpus may vary:

• Daily SIP: ₹10,79,999 invested grows to approximately ₹41,20,507
  
• Monthly SIP: ₹10,80,000 invested grows to ₹41,39,358
  
• Yearly SIP: ₹10,80,000 invested grows to ₹43,57,731
  

The difference in corpus arises because of the timing of investments and the compounding benefits applied accordingly. While daily SIPs offer more frequent compounding, monthly and yearly SIPs can sometimes slightly outperform due to larger, lump-sum contributions at earlier points.

Compounding Over the Long Term

The real power of compounding becomes evident when SIPs are held for longer periods. Let’s examine the growth of a ₹200 daily SIP across different tenures at 12% annualised returns:

• 10 years: ₹7.3 lakh investment becomes ₹13.56 lakh
  
• 20 years: ₹14.6 lakh becomes ₹55.7 lakh
  
• 30 years: ₹21.9 lakh grows to ₹1.86 crore
  
• 40 years: ₹29.2 lakh multiplies to ₹5.93 crore
  

The above clearly shows how an extra 10 years can lead to multi-fold growth. This underlines why financial experts often recommend starting early and staying invested for the long term to take full advantage of compounding.

₹100 Daily for 30 Years vs ₹500 Daily for 15 Years

Now, let’s directly compare the impact of a low-value, long-term SIP with a higher-value, shorter-term one.

• ₹100 Daily SIP for 30 Years
  
• Total Investment: ₹10.95 lakh
  
• Corpus: ₹93.28 lakh
  
• ₹500 Daily SIP for 15 Years
  
• Total Investment: ₹27.37 lakh
  
• Corpus: ₹72.05 lakh
  

Surprisingly, the lower investment of ₹100 daily for 30 years ends up generating a higher corpus than the ₹500 daily for 15 years, despite the latter involving more than twice the invested amount. This is solely because of the 15 additional years of compounding.

What Experts Suggest

According to financial advisors, the tenure of your investment is often more important than the amount itself. A smaller SIP maintained consistently over decades can outperform larger short-term contributions. For those who are young or just starting their careers, beginning with modest SIPs and gradually increasing them is a practical and effective strategy for wealth creation.

Moreover, SIPs also inculcate financial discipline and reduce the burden of timing the market. As your income grows, increasing SIP contributions while staying invested can help you reach your financial goals more efficiently.

Disclaimer: This article is for informational purposes only. The projections are based on assumed returns and may vary based on market performance. Readers are advised to consult with certified financial advisors before making any investment decisions.