Starting mutual fund SIPs at 30 instead of 25 can cut your corpus by half—here's how

Mutual fund: Investing in mutual funds via Systematic Investment Plans (SIPs) is a proven way to build long-term wealth. However, what truly matters is starting early. Even a short delay- say, five years – can significantly reduce your final corpus and impact your financial goals.

This is due to the phenomenon of compounding, where early investments generate disproportionately higher returns over time. The earnings from initial years are added to the principal, which then earns a higher return in the subsequent years.

Cost of delay: SIP at 25 vs 30

To understand the impact of delayed investing, consider the figures on the ‘Cost of Delay Calculator’. Suppose you start investing ₹5,000 in a mutual fund SIP at the age of 25. Assuming a 10% annual return, your corpus at age 50 would grow to ₹51.34 lakh.

Now, if you delay your SIPs by five years and start at age 30, your total savings by age 50 would drop to ₹25.97 lakh, almost half of what you could have accumulated.

(Calculations carried out on the cost of delay calculator)

The cost of delay in this case is ₹28.37 lakh.

If you further delay your investment by two more years and begin investing at age 32, your accumulated savings would shrink to ₹19.32 lakh, with a cost of delay rising to a whopping ₹36.31 lakh.

To summarise, if you want to make the most of your mutual fund investments, you should start as soon as possible. A delay that appears small does not turn out to be that small in the context of mutual funds.

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision.

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