The following is my observation and few takeaways that I hope to share with the community to invite feedback and contrarian thoughts.

Admins, it’s my first post. If I have placed it in the wrong category, please suggest the right one.

Background: New DIY investor, approximately 5 years into the journey. Mutual funds and direct equity investing for the equity side. FD, and Debt mutual fund for the Debt side.

The factors that affect the outcome of an investment portfolio are:

- Principal amount or starting capital.
- Time.
- Rate of return.
- Additional deposits.

The impact of first three of these factors on the size of the corpus were fairly intuitive to me. Starting capital, the number of years you stay invested and the rate of return all decide on how big or small your corpus is.

I always thought that the more you invest the bigger your corpus would be. Which is true. But the impact on “additional deposits” to the entire corpus is not very obvious. Especially when the additional deposits are only a minor percentage of your current corpus.

I will explain with some examples. I will be using this compound interest calculator with these baselines:

- Investment horizon: 20 years.
- Expected return: 12%
- Additional deposits are made monthly at the end of each month.
- Compounding happens yearly.

**Example 1: Current portfolio size is 10L.**

When monthly SIP is 50,000 INR,

- Value at the end of 20 years: 5.52 Cr (rounded for simplicity).
- Value at the end of 25 years: 10.14 Cr.

When SIP is 1L monthly,

- Value at the end of 20 years: 10.08 Cr.

So with 50K monthly deposits, it takes almost 5 more years to have as much money as you would have if you invested 1L every month.

**Example 2: Current portfolio size is 50L**

When monthly SIP is 50,000 INR,

- Value at the end of 20 years: 9.38 Cr.
- Value at the end of 23 years and 4 months: 13.92 Cr.

When SIP is 1L monthly,

- Value at the end of 20 years: 13.94 Cr.

So it takes 3 years and 4 months more of 50K per month investments to match the corpus size of what at 1L per month investment can create in 20 years.

**Example 3: Current portfolio size is 1Cr**

When monthly SIP is 50,000 INR,

- Value at the end of 20 years: 14.2 Cr.
- Value at the end of 22 years and 4 months: 18.84 Cr.
- Value at the end of 25 years and 10 months: 28 Cr.

When SIP is 1L monthly,

- Value at the end of 20 years: 18.76 Cr.
- Value at the end of 23 years and 4 months: 27.85 Cr.

When SIP is 2L monthly,

- Value at the end of 20 years: 27.88 Cr.

A portfolio starting at this size and adding 50K a month will take just 2 years and 4 months more to match the portfolio that adds 1L every month.

Similarly a 1CR portfolio adding 1L monthly will only take 3 years and 4 months more to match the portfolio that is adding 2L each month.

**The impact of the “rate of return” is more profound**

For example, a portfolio of 1Cr size and monthly deposit of 50K for 20 years will be,

- 10.32 Cr @ 10% annual returns,
- 12.1 Cr @ 11%,
- 14.2 Cr @ 12%,
- 16.66 Cr @ 13%,
- 19.55 CR @ 14%.

Each 1% change is roughly 2-3CR in this example.

**What is the point of this exercise?**

I will share some background.

I have always intuitively believed that the more you invest the bigger your corpus will be. Which is not false.

However with this mentality I tried to reduce expenses at every turn and maximize my monthly deposit. It became borderline addictive (especially with the recent bull run post covid).

If you take the case of example 2 above (which I believe would be the case of a lot of people around here), the impact of investing 50K v/s 1L gets nulled out in a matter of just 3 years and 4 months, over a 20 year time period. That’s 50k more to spend each month on a better lifestyle and all the pleasures that life has to offer. You never know if you are going to live the next 20 years anyways.

**Isn’t “Monthly Deposit” the only factor that you can control?**

On prima facie, yes. But if your goals are truly 15 or 20 years away, then you can control your “Rate of return” but investing a higher percentage into equity oriented instruments.

Allocating more funds into investments that will potentially return more has a much higher impact than trying to invest more every month.

There was a related discussion in another thread on this topic that made me want to share this thought.

**Key Takeaways**

This is what I learned.

- Enjoy life now. Investing another 50K a month doesn’t make a huge impact
*once your portfolio is of a certain size*. Make memmories that will outlive any economic crisis. - Find ways to increase your return rate. 6% v/s 12% v/s 20% makes a world of difference. Take calculated risks. Start a side project. Invest more into equity.
- Stay invested.

**What do you think?**

Where did I go wrong? Or do you agree with me? I am curious to know and learn from your thoughts.

Thank you for your attention.