Building wealth does not necessarily require you to start off with a lump sum of money. Investing a small amount of money regularly (over a long period) can enable you to reach your financial goals. The amount you may make will depend on the amount you invest, the length of your investment, and the returns you make on the investments.
To understand how investing could improve your financial status, we will take ₹1,000, ₹5,000 and ₹10,000 as monthly investments and see how each will benefit you in the long run. These figures will help you identify which option suits you most based on your income profile.
What Can Different Monthly Investments Grow Into?
A Systematic Investment Plan (SIP) helps you invest a fixed amount of money in a mutual fund on a regular basis, typically monthly. Moreover, you can begin investing with a small amount and add more money to it as your income grows.
Assume that the investment horizon is 10 years and that the annual returns earned by the mutual fund scheme would be 12% compounded annually. The below-mentioned table is purely hypothetical as actual returns from any mutual fund scheme may vary.
| Monthly Investment | Total Amount Invested | Estimated Value After 10 Years |
| ₹1,000 | ₹1.20 lakh | ₹2.30 lakh |
| ₹5,000 | ₹6 lakh | ₹11.50 lakh |
| ₹10,000 | ₹12 lakh | ₹23 lakh |
The difference is clear. Investing ₹10,000 a month requires a bigger commitment, but it can also build a larger corpus if the assumed returns are achieved. Even a ₹1,000 monthly SIP, however, gives you a way to start investing without putting too much pressure on your finances.
Why Does Staying Invested Matter?
Your monthly contribution is only one part of the picture. The time you give your investment can also influence its potential growth.
Suppose you start investing ₹5,000 every month. After five years, your total contribution will be ₹3 lakh. If you continue for another ten years, you will have invested ₹9 lakh over 15 years.
During this period, your investment may earn returns, and those returns may generate further returns. This is known as compounding. Its effect becomes more noticeable over longer periods, although market performance is never ensured.
An MF SIP calculator is used to compare various time horizons for your investments. By entering the monthly instalment, you will be able to see the projected value of it after 5, 10 and 15 years. This way, you can see the values side by side and decide for the period that you want to invest for a particular goal.
How Can You Calculate Your Potential Returns?
You do not need to work through complicated formulas to estimate your future investment value. A SIP calculator app can do the calculations for you using a few details.
You generally need to enter your monthly investment amount, the number of years you plan to invest and an assumed annual return. The calculator then estimates the amount you could accumulate.
Try changing one figure at a time. For instance, you can compare the ₹5,000 monthly SIP and ₹7,000 SIP. In addition, you can keep the installment amount and increase the time period to observe how much the total amount will change.
The MF SIP calculator is essential in such cases; however, it cannot predict your fund performance. It means that the tool is unable to display the exact value, which you may obtain instead of your shares.
Which Monthly Amount Makes Sense for You?
The best starting amount is one that fits comfortably into your monthly budget.
Starting With ₹1,000
If you are a student, a first-time earner or managing multiple expenses, ₹1,000 would be a good starting point to learn about investing without impacting your income significantly.
Investing ₹5,000
If you are a working individual with a stable income and additional disposable income after your monthly expenses, you can invest ₹5,000 every month. While it is a good amount to start with, consider your financial liabilities and only invest an amount that you are comfortable losing.
Investing ₹10,000
A Systematic Investment Plan (SIP) of ₹10,000 would be ideal for an individual with considerable income after expenses and savings who wish to build their corpus faster. It is, however, essential to calculate your monthly liabilities, including any existing loans and home installments, before making the investment.
A SIP calculator app can help you estimate how different monthly investments may grow over time. There is no need to start with the highest amount if it makes your budget difficult to manage.
Conclusion
Investing ₹1,000, ₹5,000, or ₹10,000 each month can help you achieve all your financial goals. What you earn from such an investment depends on the amount that you invest, the duration of your investment, and the market returns. You can use a SIP calculator app to compare your options and create a detailed plan on the amount you will need based on your budget. You can also explore mutual fund investment options through 5paisa and choose an approach that suits your needs.
