Power of Compounding: Systematic Investment Plan (SIP) is a simple and disciplined way to invest in mutual funds. It allows you to invest a fixed amount every month according to your financial comfort. Even a small amount like Rs 5,500 per month can be enough to start your investment journey.

One of the biggest advantages of SIP is the power of compounding. Compounding means that your money grows not only on the amount you invest, but also on the returns your investment earns over time. Simply put, your money starts earning returns on its own returns. The longer you stay invested, the stronger this effect becomes.

Many people realise the importance of savings only after spending money on unnecessary things and later feeling regret. Often, we think that if we had saved a little more every month, we could have invested it in a better way. Savings have always played an important role in our lives because they act as financial support during difficult times.

Whether it is for your children’s education, medical needs, marriage expenses, buying a house, or even planning a business in the next 6 to 10 years, savings become your strongest support system. In such situations, investing through SIP can prove to be a helpful and practical option.

Let’s understand this with an example. Suppose you invest Rs 5,500 every month through a SIP. With this one can build a substantial amount over the long term. With consistency and a reasonable rate of return, this small investment every month can build up into a substantial amount in a few years. This clearly shows how investments, given enough time, can produce spectacular results.

With the help of a SIP calculator, one can easily understand how much money needs to be invested every year, what kind of estimated returns can be expected, and how compounding works in your favour to grow your wealth steadily.

• Your monthly investment: Rs 5500
• Total investment amount: Rs 7,26,000
• Annualised return rate: 12 per cent (assumed)

You can start investing with a higher or lower amount based on your comfort. The Rs 5,500 figure is only taken as an example for explanation purposes—it is entirely your call how much you choose to invest.

As per calculations, an investor has to keep contributing to an SIP of Rs 5,500 per month for at least 11 years. Adding to the total returns at the estimated rate of return, the total estimated returns over this period are approximately Rs 7,24,277.

Thus, by investing Rs 5,500 per month, which sums up to an annual investment of Rs 7,26,000, you can potentially create a corpus of around Rs 14,50,277 in 11 years. This means that by investing and with the help of compounding, your total investment amount will almost double.

Thus, these small saving measures in a disciplined manner will help you create a huge corpus in the future.

Power of Compounding is the method where your money multiplies not only on the amount you have invested, but also on the returns that your investment generates.

The important factors behind the power of compounding are time, consistency, and patience. The earlier you start investing and the longer you remain invested, the stronger the effect of compounding becomes—even with small, regular investments.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Investment returns are subject to market risks. Readers are advised to consult a financial advisor before making any investment decisions.