Mutual Funds SIP of 100 Rs per Month: Prospects and Expected Returns

Investing 100 Rs Monthly in Mutual Funds: What to Expect in 5 Years

Investing Rs 100 per month might seem like a meager sum, but over a five-year period, it can yield significant returns through systematic investment plans (SIP) in mutual funds. While there are limited options starting with such a small monthly investment, the potential for growth is relatively high.

Exploring Investment Options for a Small SIP

Although the typical SIP requirement often starts from Rs 500 or Rs 1000 per month, it is possible to find mutual funds that accept Rs 100 per month.

Given your timeframe of 5 years, debt and balanced funds are more suitable. These funds offer annualized returns ranging from 8 to 10 percent. Assuming you can achieve a 10% annual return, here’s a detailed breakdown of your potential earnings:

Calculating Expected Returns with a 10% Annual Return

Total Investment

You will be investing Rs 100 per month for 5 years. With 12 SIP contributions per year, your total investment would be:

Total Investment 100 * 12 * 5 Rs 6000

Expected Returns and Final Amount

Assuming a 10% annual return, here’s how much you can expect:

SIP Amount: Rs 100 Annual Expected Return: 10% Time Period: 5 years SIP Frequency: 12 times per year Total Investment: Rs 6000 SIP Returns: Rs 1809 Final Amount at Maturity: Rs 7809

This means that over the five-year period, your Rs 100 monthly investment could grow to a total of Rs 7809. However, it’s important to note that these returns are estimated and based on market conditions, the actual amount could vary.

Choosing the Right Mutual Fund Scheme

The exact returns will depend on the specific mutual fund scheme you choose and the risk tolerance level you are willing to accept. Debt funds are generally less risky and could offer an estimated return of Rs 140, while equity funds, being more risky, could offer a higher return of Rs 160. Nonetheless, these returns are projections and are subject to market volatility.

Market-Linked Investments and Expected Returns

Unlike fixed deposits (FDs), where you can accurately calculate the maturity amount, mutual funds are market-linked investments. For long-term investments, equity has historically provided the best returns, averaging between 9 to 12 percent annually. Any return above this is considered a bonus but comes with significant short-term risks. If you prefer no risk, keeping your money in the bank is a safer option, but it offers lower returns.

Final Thoughts and Practical Tips

While SIPs with a Rs 100 monthly investment may seem modest, the power of compounding and long-term investment strategies can yield impressive results. However, always research the mutual fund schemes you are considering and seek advice from a financial advisor to make informed decisions. By understanding the expected returns and market conditions, you can align your investment goals with your risk appetite.