Delaying a ₹10,000 monthly SIP by one year can reduce the corpus at retirement by about ₹22 lakh. This post shows how the calculation works.
Many people plan to start investing “next year”. The intention is sound, but the cost of that one-year delay is usually larger than people expect.
The Calculation
Assume a SIP of ₹10,000 a month for 25 years, at an assumed return of 12% a year used here for illustration. The figures below use a return of 1% a month, with each instalment invested at the end of the month.
Starting today:
- Monthly SIP: ₹10,000
- Duration: 25 years
- Total amount invested: ₹30,00,000
- Estimated corpus: about ₹1.88 crore
Starting one year later:
- Monthly SIP: ₹10,000
- Duration: 24 years (one year less)
- Total amount invested: ₹28,80,000
- Estimated corpus: about ₹1.66 crore
Cost of the one-year delay: about ₹22 lakh.
The amount invested is only ₹1.2 lakh lower (12 months × ₹10,000), but the final corpus is about ₹22 lakh lower, because the money has one year less to compound.
Why One Year Makes a Large Difference
Compounding is not linear. Money invested early has the most time to grow, and growth in the final years of a long investment adds more to the corpus than growth in the early years.
The ₹10,000 invested in the first month has 25 years to compound; the ₹10,000 invested in the last month has almost none. Starting a year later removes the year of investing that would have had the longest time to grow.
Longer Delays
| Delay | Years Invested | Total Invested | Estimated Corpus (12% p.a.) | Reduction in Corpus |
|---|---|---|---|---|
| No delay | 25 years | ₹30.0 lakh | ₹1.88 crore | – |
| 1 year | 24 years | ₹28.8 lakh | ₹1.66 crore | ₹22 lakh |
| 3 years | 22 years | ₹26.4 lakh | ₹1.28 crore | ₹60 lakh |
| 5 years | 20 years | ₹24.0 lakh | ₹99 lakh | ₹89 lakh |
A five-year delay reduces the final corpus by about 47%. The amount invested is ₹6 lakh lower, but the corpus is ₹89 lakh lower, all because of the shorter compounding period.
Starting With a Smaller Amount
If ₹10,000 a month is not comfortable today, you can start with ₹2,000, ₹3,000 or even ₹500. Most mutual fund SIPs accept amounts from ₹500 a month.
The amount can be increased later. The compounding time lost by waiting cannot be recovered later.
Starting When the Market Is High
Some people delay because they think the market is too high. A SIP invests a fixed amount every month regardless of the market level. When prices are high, each instalment buys fewer units; when prices are low, it buys more. Over time this averages the purchase price, which is called rupee cost averaging.
A SIP does not require timing the market. Waiting for a fall means trying to time the market, which is difficult even for professional fund managers.
The Cost of Delay for Specific Goals
The same effect applies to goals other than retirement, when the goal date is fixed:
Child’s education (18 years away): A 2-year delay on a ₹15,000 a month SIP at 12% reduces the corpus by about ₹27 lakh, which could decide whether an education loan is needed.
Home down payment (7 years away): A 1-year delay on a ₹20,000 a month SIP at 10% reduces the corpus by about ₹4.6 lakh.
Calculate Your Own Figures
The free Cost of Delay Calculator shows how much a delay costs for your own SIP amount, time horizon and expected return. It needs no login or sign-up and stores no data.
Steps to Start a SIP
- Choose an amount you can invest every month comfortably, even if it is small.
- Choose a mutual fund scheme suited to your goal and time horizon. (A large-cap or flexi-cap fund is a common starting point.)
- Set up the SIP.
- Increase the amount when your income rises.
If you would like help choosing funds for your goals, get in touch. There is no minimum amount.
Anish Kumar is an AMFI-registered Mutual Fund Distributor (ARN: 329356) and SIF Distributor based in Bengaluru. All returns mentioned are illustrative estimates and are not guaranteed. Mutual fund investments are subject to market risks.
