Mutual Fund Investment Plan: If you come to think of it, most of us have done this at least once. We start an SIP thinking we will stay consistent. However, it happens that we stop our SIP within a few years for some reason. Here’s the turning point: most of us become ignorant about that particular investment and forget about the money already invested. That abandoned investment sits untouched for years, neither redeemed nor managed. So, what really happens to such forgotten investments? Do they work for us, or against us? Or do they fall somewhere in between? Let’s find out what happens if you stop your SIP and don’t withdraw the money. Here, we are considering 5,15, and 20 years of investment period.
Example 1: Let’s assume a scenario in which you stopped the SIP, but the money stays invested; you did not pull it out.
Suppose you invest Rs 15,000 each month for five years. Later, you suddenly stopped making contributions to your monthly SIP. At the time you stopped investing further, your corpus was estimated at Rs 12.3 lakh, assuming the fund grew at 12 per cent annually. Now, here’s what happens if you do nothing and let the compounding take over.
After five years, your Rs 12.3 lakh would become Rs 21.6 lakh. After 15 years, it would become Rs 67.3 lakh.
Now let’s suppose you panic and exit the fund, and simply keep the money with yourself.
If inflation rises by 5 per cent annually, the real value of your money would fall to around Rs 6 lakh after 15 years.
This is the silent tax that slowly erodes the value of every idle rupee. That’s the difference between letting your money compound for you and allowing inflation to compound against you.
What if you withdraw and shift your money to an FD?
You may also have the thought of shifting your money to an FD, considering market volatility. Let’s check, if you plan to take this step, how much corpus you could accumulate. It is important to note that these are just examples for understanding the scenario.
At 7 per cent FD returns, your Rs 12.3 lakh would become Rs 33.9 lakh in 15 years.
Please note that this does not account for taxes. FD interest is taxed every year, reducing the returns earned annually. In comparison, equity and equity mutual funds can be more tax-efficient when held for the long term.
Example 2: What if you continue your SIP
If you continued a monthly SIP and invested Rs 15,000 per month through a systematic investment plan for 10 and 20 years. Here’s how your wealth could grow if the investment continues to earn a 12% annualised return: after 10 years, you could have around Rs 34.8 lakh, while after 20 years, your corpus could grow to nearly Rs 1.5 crore.
(Source: Value Research Data)
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
