You can build a fund of ₹1 lakh by investing ₹5,000 every month. Find out how long it takes to accumulate this amount through SIPs versus Post Office Recurring Deposits (RDs) and understand the differences between the two options.

Imagine setting aside just ₹5,000 from your pocket each month and watching it grow into a ₹1 lakh fund over time—how would that feel? In reality, you don't need a large lump sum to start investing; the habit of investing small amounts monthly can gradually build a substantial corpus. The question remains: how many months does it take to reach ₹1 lakh with a monthly investment of ₹5,000, and which option is better—SIP or Post Office RD?

Mutual Fund SIPs are ideal for those who wish to invest small amounts regularly. If you invest ₹5,000 per month via SIP, your total contribution over 18 months would be ₹90,000.

Assuming an annual return of 12%, this investment could grow to approximately ₹98,000 in about 18 months. Consequently, you could cross the ₹1 lakh mark in roughly 19 months. Over 1.7 years, an investment of ₹95,000 could yield an estimated return of around ₹9,054, bringing the total corpus to approximately ₹1.04 lakh.

The Benefit of Investing an Extra ₹500

If you want to reach your goal sooner, increasing your monthly investment amount—rather than taking on more risk—can be a practical strategy. For instance, investing ₹5,500 instead of ₹5,000 per month can help you hit the ₹1 lakh target faster.

Keep in mind that Mutual Fund SIPs are market-linked; therefore, a 12% return is merely an estimate and not guaranteed. Opt for an RD to Avoid Market Risk

If you wish to keep your money away from market fluctuations, a Post Office Recurring Deposit (RD) is a viable option. It involves depositing a fixed amount every month, and the corpus grows based on the applicable interest rate.

Assuming an annual interest rate of 6.45%, a monthly deposit of ₹5,000 can help you reach a target of ₹1 lakh in approximately 21 months. Upon maturity, the total corpus could amount to ₹1,11,406, with the total interest earned being ₹6,406.

Returns on an RD are relatively predictable, whereas returns on a Systematic Investment Plan (SIP) depend on market performance. Consequently, while SIPs offer the potential for higher earnings, they also carry market risk.