Over the past few years, terms like SIP, and mutual fund have gained major momentum. People in India are getting familiar with mutual funds and have started to make investments. However, the number is still less as to date there are less than 4cr Indians who have invested in Mutual Funds only!

While the flexibility of SIPs allows investors to start and stop contributions at their convenience, stopping SIPs prematurely can profoundly impact one's financial goals. Let's explore this with an illustrative example: Scenario: Mr. Sharma, a diligent investor, starts a SIP with an initial investment of ₹10,000 and commits to investing ₹5,000 every month. He selects a well-diversified mutual fund with a historical average annual return of 12%. Scenario 1: Consistent SIP for 15 years In this scenario, Mr. Sharma remains committed to his SIP for the entire 15-year term. Here's how his investment might evolve:

• Initial Investment: ₹10,000
• Monthly Contribution: ₹5,000
• Annual Return: 12%

Using the power of compounding, the future value of Mr. Sharma's investment after 15 years would be approximately ₹31,59,791. Scenario 2: Stopping SIP after 5 years In this scenario, Mr. Sharma starts his SIP with the same initial investment and monthly contributions but decides to halt his SIP after just 5 years.

• Initial Investment: ₹10,000
• Monthly Contribution for 5 years: ₹5,000 x 12 months x 5 years = ₹3,00,000
• Total Contributions: ₹10,000 + ₹3,00,000 = ₹3,10,000

Now, let's calculate the future value of this ₹3,10,000 with the same 12% annual return, but over a shorter time frame: Using the power of compounding, the future value of Mr. Sharma's investment after 10 years (15 years - 5 years) would be approximately ₹8,64,078. Comparison:

• Scenario 1 (15 years of consistent SIP): ₹31,59,791
• Scenario 2 (5 years of SIP, then stopping): ₹8,64,078

As this example highlights, stopping SIPs early can result in a significantly lower corpus than staying committed for the full term, despite the total contributions being the same (₹3,10,000). The longer tenure in Scenario 1 allowed Mr. Sharma's investments to grow exponentially through the power of compounding. In India, where financial goals like education, home ownership, and retirement planning are paramount, the impact of halting SIPs prematurely can be a major setback. Therefore, investors should consider their long-term objectives and remain committed to SIPs to fully harness the potential benefits of compounding and achieve their financial aspirations.