What is SIP (Systematic Investment Plan)?
A Systematic Investment Plan (SIP) is a method of investing a fixed amount regularly in mutual funds. Instead of investing a lump sum, you invest small amounts (typically monthly) which helps you build wealth over time through the power of compounding. SIP is one of the most popular investment methods in India because it's disciplined, affordable, and removes the stress of timing the market. When markets are down, your fixed amount buys more units; when markets are up, it buys fewer units—this is called rupee cost averaging. Think of SIP like a financial EMI, but instead of paying for a loan, you're paying yourself first to build wealth. Starting with as little as ₹500 per month, anyone can begin their wealth-building journey through SIPs.
SIP Returns Formula
How to use this calculator
- Enter your monthly SIP amount—how much you'll invest each month
- Set the expected annual return rate (12% is typical for equity funds)
- Choose the investment duration in years
- View your estimated future value, total investment, and wealth gained
When Should You Use a SIP Calculator?
- Planning monthly investments for long-term goals like retirement or child education
- Comparing SIP returns vs lump sum investment for the same amount
- Setting realistic expectations for your mutual fund investments
- Deciding how much to invest monthly to reach a target corpus
- Understanding the impact of investment duration on final wealth
- Evaluating different expected return rates for conservative vs aggressive portfolios
Real-World Examples
Retirement Planning
You're 30 years old and want to build a retirement corpus by age 55. You can invest ₹15,000 per month.
💡 Your total investment of ₹45 lakhs grows to nearly ₹2.9 crores. That's the power of compounding over 25 years!
Child's Education Fund
You want to save for your newborn's higher education (18 years away). You start with ₹10,000/month.
💡 Investing ₹21.6 lakhs over 18 years gives you ₹75+ lakhs—enough for premium education in India or abroad.
Short-Term Goal
You want to save for a car down payment in 3 years. You can set aside ₹20,000 monthly.
💡 For short-term goals, use debt funds or conservative hybrid funds. The 10% return assumption is realistic for such funds.
SIP vs Lump Sum Investment
Choosing between SIP and lump sum depends on your situation. Here's a quick comparison.
| Feature | SIP | Lump Sum |
|---|---|---|
| Investment Style | Regular (monthly) | One-time |
| Market Timing Risk | Lower (averaged) | Higher |
| Discipline Required | Built-in | Self-managed |
| Best For | Salaried individuals | Windfall gains |
| Rupee Cost Averaging | Yes | No |
| Entry Barrier | Low (₹500/month) | High (need lump sum) |
Common SIP Mistakes to Avoid
Stopping SIPs During Market Volatility
The Issue:Stopping when markets are down defeats the purpose of Rupee Cost Averaging, which relies on buying more units at lower prices.
Expecting Instant Returns
The Issue:Equity mutual funds are long-term instruments. Short-term market noise can lead to flat or negative returns initially.
Ignoring Inflation (Static Investment)
The Issue:Investing the same fixed amount for 10 years means your investment value effectively decreases due to rising costs.
Pro Tips for SIP Investments
How Does SIP Work?
When you invest through SIP, a fixed amount is automatically debited from your bank account on a chosen date each month. This amount purchases mutual fund units at the current NAV (Net Asset Value). Over time, you accumulate units at various prices, averaging out your cost. This is called rupee cost averaging—it protects you from the volatility of investing a lump sum at a single price point.
The Power of Compounding in SIP
Albert Einstein called compound interest the "eighth wonder of the world." In SIP, your returns generate their own returns. For example, at 12% annual return, money doubles roughly every 6 years. A ₹10,000 monthly SIP for 30 years at 12% can grow to over ₹3.5 crores—your total investment is only ₹36 lakhs, but compounding adds ₹3 crores!
What Returns Should You Expect?
Historical equity mutual fund returns in India have been 12-15% CAGR over 15+ year periods. However, past performance doesn't guarantee future returns. For conservative planning, use 10-12% for equity funds, 7-8% for hybrid funds, and 6-7% for debt funds. Always have realistic expectations and a long-term horizon for equity SIPs.
Frequently Asked Questions
What is the minimum amount for SIP?
Most mutual funds in India allow SIPs starting from ₹500 per month. Some fund houses even offer ₹100 SIPs. The low entry barrier makes SIP accessible to everyone—students, young professionals, and seasoned investors alike.
Is SIP better than FD?
For long-term goals (7+ years), equity SIPs historically outperform FDs significantly. FDs offer 6-7% fixed returns, while equity SIPs have delivered 12-15% over long periods. However, SIPs carry market risk and are not suitable for short-term goals where capital safety is priority.
Can I stop or pause my SIP?
Yes, you can stop, pause, or modify your SIP anytime without any penalty. However, stopping SIPs during market downturns is usually a mistake—that's when you're buying units at lower prices. Consider pausing only if you face genuine financial difficulties.
When is the best date to start SIP?
There's no 'best' date—studies show the date of SIP makes minimal difference over long periods. The best time to start is NOW. However, practically, choose a date 2-3 days after your salary credit to ensure sufficient bank balance.
How is SIP different from recurring deposit (RD)?
RD offers fixed, guaranteed returns (typically 5-7%) and is suitable for short-term, low-risk goals. SIP invests in mutual funds with variable returns (potentially 10-15% in equity) and is better for long-term wealth creation. SIP carries market risk; RD doesn't.
Does SIP guarantee returns?
No, SIP does not guarantee returns. It's a method of investing, not a product. Returns depend on the underlying mutual fund's performance. Equity SIPs can even show negative returns in short periods. SIP reduces timing risk but doesn't eliminate market risk.