The SIP showdown: Investing Rs 15,000 for 20 years vs. Rs 20,000 for 15 years — The winner will surprise you

All investors start their journey by having the same thought. Is it better to start small, and early, or to wait until you can invest larger sums? This question appears simple, but to learn about investing at the right time is important.

Let us take two investors who we will call Aarav and Meera. Aarav begins today, investing ₹15,000 a month for 20 years. Meera defers starting and has wasted five years, and then starts contributing aggressively ₹20,000 a month for 15 years. Both contribute nearly the same amount altogether. At the end, when their investment clocks stop, the results are startlingly different.

Before you decide which SIP strategy suits you, let’s break down this game of compounding and uncover which investor truly wins — and why the difference might shock you.

Round 1: The numbers game

Let’s assume both invest in equity mutual funds with an average annual return of 12%, a realistic long-term figure.

Winner: Aarav (₹1.50 crore vs ₹99 lakh)

Difference: ₹51 lakh, despite investing the same total amount.

#2. The power of compounding: Why time is the great equalizer

Compounding means your returns start generating their own returns. The longer one stays invested, the bigger this ball of snow becomes.

For Aarav, the first couple of years of this SIP have no real consequence, but after 10-12 years the curve suddenly steepens and in year 20 explodes.

In fact, over 40% of Aarav’s wealth is created in the last five years and the reason for this is not because he invested more, but that the returns on investment in the past underwent compounding.

Meera, on the other hand, loses these important first five years — and the lack of time cannot be replaced, no matter how big her SIP.

#3. The race to make-up lost time: Will more money eliminate lost time?

Realising that she had started late, Meera decided to raise her SIP from ₹20,000 per month to ₹25,000 per month, hoping that a larger investment would help to compensate her for the lost years.

Despite investing an additional ₹9 lakh, Meera was still behind. Aarav with a head start of five years had enabled the compounding of his returns to increase each year as with that much greater time span there were gains upon gains. Meera with the larger SIP could not equal the greater compounding gain caused by the lost years directly underlining that time once again proved an asset far superior than size of contribution.

#4. How compounding works over time

In the earlier years, Aarav and Meera’s investments grow at a similar pace. Meera’s higher SIP helps her to keep pace, and appear to be slightly ahead of Aarav. By around year 10 or so, both portfolios would be more or less similar, say around 40 lakhs each.

However, in the next few years, Meera’s greater contributions help her secure steady growth, but Aarav’s investments started earlier will show their advantage. His corpus is earning returns on both his contributions and the returns on his contributions for the past years.

In the last lap, Aarav’s investments grow dramatically. Compounding provides him with exponential growth over his steady SIP contributions, whereas Meera’s portfolio, though it is growing, will not grow with the same speed. Thus, it is clear how starting earlier generally more than compensates for contributing a larger amount later.

#5. The real life lesson: Start small, start early

Many new investors are afraid to start SIPs because they think the amount of money is too small to matter. This example indicates that small investments started early can make a great deal of wealth. An SIP that is started today will often be worth more than many large SIPs, because they will have had time to benefit from the compounding magic.

Suppose for example to invest only Rs. 10,000.00 per month for 20 years at a reasonable 12% annual profit. You will have much greater corpus in the end than you will if you would invest Rs. 15,000.00 per month for 15 years. The difference does not lie in the amount you are investing but in that your money has acquired a number of excess years to have profits upon profits.

The lesson is simple – start with the “correct” amount without waiting. A small SIP can be started now so that you will have the benefits of compounding which will help you tremendously in laying the necessary foundation for a financial future.

#6. Focus on time in the market, not timing the market

So many people are waiting for the “perfect time” to invest. Thinking they will buy when the market is low. The problem is they do not know when that is. Even experienced investors have a poor record in trying to time the market. The real benefit is in being in the market for the long haul.

Aarav never tried to time the market, he just invested the same amount every month. His early start compounded over a longer period of time until the real explosive gains took him to a chart that looked like exponential growth. Meera was not able to get back what she lost and the large investments she made later could not catch up to the compounded returns Aarav received despite the up and down performance of the market.

The lesson here is simple: If you want to make long term wealth, it is not going to come from attempting to guess the market. It comes from early and consistent investing with sufficient time and letting time and compounding work for you.

#7. The final payout

This comparison proves one thing clearly: starting early is more important than simply investing larger amounts at a later date. Aarav’s smaller monthly SIP increased over the years, there was benefit from compounding factors, but Meera’s larger SIP, which was larger monthly, failed to keep up due to its late start.

Time in the market is the most potent factor contributing towards the accumulation of personal wealth. The earlier you start investing the more chance your money will have to grow and the less you will have to fret over trying to “catch up” with greater monetary contributions. Even small contributions invested regularly from an early age, can, over a number of decades, build up into large amounts.