# Zerodha coin says, SIP of Rs.5000 monthly can you save up to Rs.28 lacs over 25 years if invested in Direct MF instead of regular. How?

Is that example they have given on Coin correct?
Can somebody help me understand the basis of that calculation?

Suresh, the example is correct, it is the power of compounding.

Let me explain how this is calculated. Assume you are investing into DSP Blackrock tax saver fund. The expense ratio for Regular plan is 2.56 and expense ratio for Direct plan is 1.11. What this means is that Direct plan will outperform over regular by 1.45% per year as there is no distributor commissions to be paid.

Assume that the regular plan returns 15% per annum for the next 25 years. What this would mean is that direct plan will return 16.45% (1.45% more). This is an assumption though, when investing into MF, past returns doesn’t necessarily guarantee the same future returns.

Find here an excel calculation of monthly SIP of Rs 5000 for 30 years. The terminal value field indicates what each SIP will be worth at the end of the 25 years (you can check out the formula as well).

If you mention growth rate as 15% (regular plan) on the excel, you will see the total terminal value as Rs 1.38 crores. If you mention the growth rate as 16.45% (direct plan), you will see that the terminal value is Rs 1.76 crores. Whopping Rs 28 lks more, which essentially is how much you would save by opting into direct plan.

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