The Power of Compounding: How ₹5,000 Monthly SIP Can Turn Into Lakhs in 25 Years
Investing regularly in a Systematic Investment Plan (SIP) is one of the smartest ways to build wealth over time. Even small amounts, when invested consistently, can grow into a large corpus—thanks to the power of compounding.
What is the Power of Compounding?
Compounding means earning returns not only on your principal investment but also on the returns you’ve already earned. Over time, this snowball effect makes your money grow exponentially. The longer your investment period, the greater the compounding impact.
₹5,000 Monthly SIP for 25 Years
Let’s assume you invest ₹5,000 every month in a mutual fund SIP with an average annual return of 12%.
Here’s how your investment grows:
| Duration | Total Invested (₹) | Estimated Value (₹) | Wealth Gain (₹) |
|---|---|---|---|
| 10 years | 6,00,000 | 11,60,000 | 5,60,000 |
| 15 years | 9,00,000 | 24,30,000 | 15,30,000 |
| 20 years | 12,00,000 | 49,90,000 | 37,90,000 |
| 25 years | 15,00,000 | 95,90,000 | 80,90,000 |
As you can see, a disciplined investment of just ₹5,000 per month can help you accumulate nearly ₹1 crore in 25 years — all through patience and consistency.
Why Starting Early Matters
Starting early gives your money more time to compound. Even a delay of a few years can significantly reduce your returns. For example, if you start the same SIP after 5 years, your corpus at the end of 25 years could drop by almost 40%.
Benefits of SIP and Compounding
Disciplined savings: Encourages regular investing habits.
Rupee cost averaging: Helps reduce the impact of market volatility.
Long-term growth: Leverages the exponential power of compounding.
Wealth security: Builds a strong financial foundation for future goals.
Final Thoughts
The power of compounding is best realized when you start early, invest regularly, and stay invested. A ₹5,000 monthly SIP may seem small today, but over 25 years, it can help you achieve major financial milestones such as retirement savings, children’s education, or buying your dream home.
Pro Tip:
Use a SIP calculator to estimate your returns and adjust your monthly investments based on your financial goals.
