Does slow and steady really win the race? Financial planners often emphasize the importance of investing early to maximize compounding benefits. Compounding reinvests returns to generate additional earnings over time. Now, consider this: Investing Rs 11,000 monthly in a mutual fund via SIP, aiming for early retirement at 55, how much would delaying your investment cost you every 5 years? This writeup provides estimates on SIP investments for 5-35 years, helping you plan your journey to 55 at a modest annualized return of 12 percent. 

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POWER OF COMPOUNDING | STARTING AT AGE 20

Assuming you get an annualized return of 12 percent, an SIP of Rs 11,000 per month will enable you to invest a sum of Rs 46.2 lakh in 35 years, leading to returns of Rs 6.68 crore hence creating a corpus of approximately Rs 7.1 crore, calculations show. 

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POWER OF COMPOUNDING | NOW, CAN YOU GUESS THE OUTCOME IN 30 YEARS INSTEAD OF 35?

In this example, let’s say you start your investment at 25, instead of 20 years of age. You will end up investing a total of Rs 39.6 lakh over a period of 30 years (from age 25 to age 55), which is Rs 6.6 lakh less than the previous example. 

Now, not only you will be investing a smaller amount of money, but you will also be removing 5 years of additional compounding, as in the previous example. 

This way, you will reach a total corpus of approximately Rs 3.88 crore including estimated returns of about Rs 3.49 crore, as per calculations. 

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POWER OF COMPOUNDING | TAKE 5 MORE YEARS OUT OF THE PICTURE AND NOTICE THE DIFFERENCE

In this example, you start your Rs 11,000 monthly SIP at age 30, which will give you 25 years of investment and compounding.

Can you guess your estimated returns in this case?

Your total investment of Rs 33 lakh over the 25-year period will earn you estimated returns of Rs 1.76 crore, leaving you with a total corpus of Rs 2.09 crore at age 55, calculations show. 

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POWER OF COMPOUNDING | NOTICE THE PATTERN?

If you remember the first example, you may have already inferred that no matter how disciplined you may be as an investor, doing the exact same over a smaller span of time affects your returns significantly. 

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POWER OF COMPOUNDING | WHAT WILL HAPPEN WHEN YOU START AT AGE 35?

A monthly SIP of Rs 11,000 for 20 years (from age 35 to age 55) will have you invest Rs 26.4 lakh, leading to a corpus of approximately Rs 1.1 crore including estimated returns of Rs 83.51 lakh, calculations show. 

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POWER OF COMPOUNDING | GUESS THE OUTCOME WHEN YOU START AT AGE 40

If you start at age 40, the same monthly SIP of Rs 11,000 will help you invest Rs 19.8 lakh into the mutual fund scheme of your choice, leading to a corpus of Rs 55.5 lakh by age 55 given the expected annualized return of 12 percent, calculations show.

The corpus of Rs 55.5 lakh means you will get estimated returns of about Rs 35.7 lakh over the 15-year period. 

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POWER OF COMPOUNDING | STARTING AT AGE 45 WILL LEAVE YOU WITH ONLY 10 YEARS OF INVESTMENT AND...

Starting your Rs 11,000 monthly SIP at age 45 will help you invest a sum of Rs 13.2 lakh in the 10 years before you turn 55.

In this example, assuming the annualized return of 12 percent, you will end up with a corpus of about Rs 25.56 lakh once you turn 55, calculations show.

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POWER OF COMPOUNDING | NOW, WHAT IF YOU START AT AGE 50?

With only 5 years left before your planned retirement, the exact same monthly investment of Rs 11,000 will help you build a corpus of approximately Rs 9.07 lakh including estimated returns of Rs 2.47 lakh with a total investment of Rs 6.6 lakh, as per calculations. 

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POWER OF COMPOUNDING | NOW, HERE'S A RECAP