How Every Rupee You Invest Could Make a Difference to Your Goals

Jan 24, 2023 / Reading Time: Approx. 8 mins

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There is a common myth when it comes to investing. Many individuals think that a big fat amount is required just to get started. However, in reality, the process of building a solid investment portfolio can begin even with a small budget. Every rupee you invest in a worthwhile investment avenue brings you one step closer to accomplishing your desired financial goals.

Recently, A friend of mine called me as she wanted to begin investing for her daughter's future. She said, "Mitali, My daughter is 2 years old now, and I intend to begin investing in mutual funds in her name. However, rising inflation has resulted in a high cost of living, making it difficult to allocate a large sum for investment purposes."

To which I replied, "You see, there is no need to wait until you have a huge sum to invest in mutual funds. You can simply invest in mutual funds through a monthly SIP starting with Rs 500/- and gradually increasing the amount. It is not about how much you invest but about how consistently you invest in a worthy mutual fund scheme that is aligned to your financial goals.

Also, as you mentioned about rising inflation, it indicates the rising cost of education as well. Since your investments in mutual funds will be for the long-term, it provides you with the benefit of the power of compounding and rupee-cost averaging. Mutual funds provide long-term returns that outperform inflation and assist you in building the necessary corpus to reach your goals. As a result, even with a limited budget, it is important to begin investing for your daughter's financial future."

However, you have no control over the inflation rate. To keep ahead of inflation, you must raise your purchasing power, which requires making your money grow. For example, 7% inflation indicates that you will need 7% more money to purchase the exact same thing next year. Investing your hard-earned money effectively in rewarding avenues that provide substantial returns can increase your spending power and allow you to keep up with inflation.

Here's an example of how 7% inflation affects the value of your money over 5 years:

Amount in hand as of today Rs 1,00,000
After 1 year Rs 93,000
After 2 years Rs 86,490
After 3 years Rs 80,436
After 4 years Rs 74,805
After 5 years Rs 69,569
(For illustration purpose only)

Thus, it is important to begin small investments in avenues like mutual funds that generate inflation-beating returns and help you attain your financial goals.

Investing effectively toward your goals isn't rocket science. You don't have to be the 'Wolf of Wall Street' to start investing; even if you only have a small amount, start investing regularly. You can amass a significant amount of money towards your S.M.A.R.T financial goals if you start small and invest regularly. As it's said, "Little drops of water make the mighty ocean."

How Every Rupee You Invest Could Make a Difference to Your Goals
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Apart from that, investing in mutual funds on a regular basis encourages you to set aside money every month, thereby instilling financial discipline in the long run. While investing entails putting the money to work in avenues that carry a certain risk to generate higher returns. However, there is a basic principle for investing that you must follow to balance out market risk: always invest according to your risk tolerance, investment horizon, and financial goals.

How you can invest wisely towards your financial goals?

Investment in mutual funds should be approached with goal-based planning. Many of you will have financial goals such as a dream home, a luxury car, an exotic vacation, your children's education, a retirement fund, and so on. To accomplish these envisioned financial goals, you must begin investing as soon as possible. When your goals are defined, whether long-term or short-term, it is easier to calculate the right amount you need to invest via SIP in mutual funds.

SIPs have become more popular due to the benefits they provide to investors. SIP is a great tool for averaging investment costs and maximising returns.

[Read: 5 Key Benefits of Investing in Mutual Funds via SIP]

Consequently, SIPs give investors access to the power of compounding, allowing you to increase your mutual fund SIP returns over time. Similar to bank recurring deposits, the returns gained on each SIP transaction stay invested in the fund for a long time and compound, resulting in higher returns for SIP investors.

Compounding of SIP returns refers to the returns you get on your accrued returns (calculated using the XIRR method). It has the potential to assist investors in building and accumulating significant wealth over time. Here's an illustration of how a small SIP can help you build wealth over time by leveraging the power of compounding:

Let's assume mutual funds offer an annual return of 10%. Here the goal is to build a retirement corpus. The table below shows the difference in the cumulative corpus of individuals investing via mutual fund SIP with varied investment horizons:

Investors Monthly SIP (in Rs) Started SIP at Age (in years) Years until retirement Total investment amount (Rs in lacs) Accumulated corpus via SIP (Rs in crores)
Nisha 1,000 25 35 4,20,000 38,28,277
Rahul 1,000 35 25 3,00,000 13,37,890
(Source: PersonalFN Research)
This table is for illustration purpose only

[SIP Calculator]

In the aforementioned example, Nisha began investing in mutual funds through SIP at an early age. If she continues her SIP until she reaches retirement age, she will have amassed a corpus of over Rs 38 lacs. Whereas Rahul began saving through a mutual fund SIP much later than Nisha, leaving him with less years to continue with his SIP and hence his acquired corpus is lower than Nisha's.

Therefore, as you can see, even with a small budget, you can start investing, and every rupee counts towards your goals. To achieve your financial goals, you should consider investing as soon as possible rather than waiting for the optimal time to begin an SIP in mutual funds. Although SIP is a method of progressively investing in mutual funds, your regular contribution to your financial goal should rise in tandem with your income. For example, if you are a salaried individual, any additional income over and beyond your fixed income, such as annual raises and bonuses, must be used to increase your SIPs.

Now that you have understood that investing in mutual funds does not require a huge savings amount, bear in mind that selecting the best suitable mutual fund schemes aligned to your goals is equally important. Given that, many individuals find it difficult to choose suitable mutual fund schemes to invest towards their financial goals due to a lack of market knowledge and a struggle to deal with the high market volatility driven by dynamic market conditions.

PersonalFN's SMART Fund Explorer can help you plan your mutual fund investments smartly to achieve your financial goals. It provides a list of the best suitable mutual fund schemes recommended by our research team that will help you reach your financial goals.

All you have to do is follow these 4 simple steps:

Step #1 - Select the type of goal (buying a house, child's education, child's marriage, car, retirement, etc.).

Step #2 - Determine a suitable time frame for achieving these goals.

Step #3 - Insert the amount of money that you are willing to invest towards your goal.

Step #4 - Choose the type of investment (lumpsum or SIP).

PersonalFN's SMART Fund Explorer will draw the return expectation to reach your goal and two mutual fund investment options (A & B) which includes investment across asset classes and market cap. You may choose either of the options based on your risk profile.


This is an opportunity to begin your investment in mutual funds with a smartly selected list of the best suitable mutual funds. So what are you waiting for? Click on the key to accomplishing your financial goals with PersonalFN's SMART Fund Explorer.

Happy Investing!


MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.

She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.

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