It is an age-old doctrine that says that starting a systematic investment plan (SIP) in 20s can help you accumulate more money than what you can make when you start in your 30s.
A recently released report Wealth Conversations by FundsIndia for April 2023 lends credence to this as it shows that monthly SIP amount required at the age of 25 to accumulate ₹10 crore at the age of 60 almost doubles when the SIP commences at the age of 30.
If you start investing via SIP at the age of 25, the monthly SIP required (at 12 percent per annum) to accumulate ₹10 crore by the age of 60 is ₹15,000, shows the report. However, upon delaying the SIP and starting at 30, the monthly SIP required is ₹28,000.
And upon further delaying it to the age of 40, the monthly SIP required is 6x more at ₹1,00,000.
The report further highlights the magic of compounding. The report says that if you invest ₹30,000 every month and it grows at 12 percent per annum, it will take 12 years 4 months to reach the first ₹1 crore but for the second ₹1 crore it will only take around 4 years 9 months and the third ₹1 crore takes 3 years.
Broader index returns
The FundsIndia report highlights the returns given by financial markets as well as by mutual funds in India in the past few years.
The CAGR returns given by Nifty Large Cap 50 TRI was 13.2 percent in the past 10 years as on March 31, 2023 whereas the returns posted by mid cap and small cap were higher. Nifty mid-cap 150 TRI delivered a return of 18.2 percent in the past 10 years and Nifty small cap 250 TRI gave a CAGR return of 16 percent.
|Index||10-year returns (%)|
|Nifty Large cap 50 TRI||13.2|
|Nifty Mid-cap 150 TRI||18.2|
|Nifty Small cap 250TRI||16|
|Nifty Flexi cap 500 TRI||13.9|
(Source: MFI, Funds India Research, as on March 31, 2023)
Mutual Fund returns
The ‘Wealth Conversations’ report also shows the compound annual growth rate (CAGR) returns given by mutual funds across market capitalisations.
The top performing large cap funds are Franklin India Bluechip and HDFC Top 100 Fund, shows the report. They delivered 11.6 percent and 13.3 percent returns respectively in the past 10 years.
In the mid cap fund category, Franklin India Prima Fund and Nippon India Growth Fund delivered CAGR returns of 17.1 and 16.8 percent, respectively in the past 10 years.
In the flexi cap fund category, top performing funds are ABSL flexi cap fund, Franklin India Flexi Cap Find and HDFC Flexi Cap Fund that delivered a return of 15.7 percent, 15.1 and 15.3 percent, respectively.