Saving Rs 100 a day in SIP could grow to Rs 15.13 lakh in 15 years at 12% return

People with modest incomes can also build a fund worth lakhs of rupees by saving regularly, as an example involving a mutual fund SIP shows. Saving money is essential, but many people are unable to do so for want of funds.

The example begins with Rs 100 a day. Someone who saves Rs 100 a day has Rs 3,000 a month. Assume this Rs 3,000 is invested every month in a mutual fund SIP and earns an average return of 12 per cent a year. The growth of the money over time is shown across three periods.

The first period is five years. Investing Rs 3,000 a month makes for a total investment of Rs 1.80 lakh. The estimated return is Rs 67,459 and the total fund comes to Rs 2.47 lakh.

Investing the same Rs 3,000 a month for ten years makes the total investment Rs 3.60 lakh. The estimated return is put at Rs 3.37 lakh and the total fund at Rs 6.97 lakh.

Over 15 years, the total investment is Rs 5.40 lakh. The estimated return is Rs 9.73 lakh and the total fund reaches Rs 15.13 lakh.

The best feature of an SIP is that it earns interest on interest, which is the benefit of compounding. The investor earns returns not only on the amount deposited but also on the returns earned each time.

For this reason, the gap between investment and returns is not very visible in the first few years. As time passes, however, the returns graph begins to rise sharply. In investing, therefore, how much is put in at the start matters less than how long the investment is continued.

The information on mutual funds given here is not investment advice. Readers are advised to consult their financial advisers before investing.