What is a SIP?
A Systematic Investment Plan (SIP) is a way to invest a fixed amount in a mutual fund at regular intervals, usually every month. Instead of trying to time the market with one large investment, you invest a little at a time. When prices are low your instalment buys more units, and when prices are high it buys fewer, which is known as rupee cost averaging. Over long periods, reinvested returns start earning returns of their own: this is compounding, and it is why the green part of the chart above grows so quickly in later years.
SIP formula
- FV = future value of your SIP
- P = monthly investment
- i = monthly rate of return = expected annual return ÷ 12 ÷ 100
- n = number of monthly instalments (years × 12)
Worked example
You invest ₹10,000 a month for 10 years and expect 12% a year. Then i = 0.01 and n = 120. The future value is about ₹23,23,391. You put in ₹12,00,000 yourself, so the estimated gain is about ₹11,23,391. Stretch the same SIP to 20 years and it grows to about ₹99.9 lakh, because the second decade compounds on a much bigger base.
Why a step-up SIP makes a big difference
Most people's income rises over time, so keeping the SIP flat means investing a smaller share of income each year. A step-up SIP raises the monthly amount by a fixed percentage every year. In the example above, adding a 10% yearly step-up raises the final value from about ₹23.2 lakh to about ₹33.7 lakh. Try the step-up slider to see the effect on your own plan.
Tips for SIP investors
- Start early. Time in the market matters more than the amount. Compare 10 and 20 years with the slider.
- Stay consistent. Pausing a SIP during a market fall means missing cheaper units.
- Be realistic about returns. Equity funds have historically been volatile; a conservative estimate gives a safer plan.
- Account for inflation and taxes. The figures here are before tax and in today's money terms they will be worth less.
Frequently asked questions
What is a SIP?
A SIP (Systematic Investment Plan) is a way of investing a fixed amount in a mutual fund at regular intervals, usually every month. Regular investing lets you benefit from compounding and rupee cost averaging.
How much will a ₹10,000 monthly SIP grow to in 10 years?
At an expected return of 12% a year, a ₹10,000 monthly SIP for 10 years grows to about ₹23.23 lakh. You invest ₹12 lakh and the estimated gain is about ₹11.23 lakh.
What is a step-up SIP?
A step-up (or top-up) SIP increases your monthly investment by a fixed percentage every year, for example 10%, so your investments grow along with your income.
Are SIP returns guaranteed?
No. Mutual fund returns depend on market performance. This calculator shows an estimate based on a constant rate of return; actual results will vary from year to year.
What is the minimum SIP amount?
Many mutual funds in India accept SIPs from as little as ₹100 to ₹500 a month. Check the specific fund's minimum.
SIP or lump sum: which is better?
A lump sum can do better in a steadily rising market, while a SIP spreads your risk across market ups and downs and suits regular monthly income. Many investors use both.
This calculator is for information only and is not investment advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully and consider speaking to a qualified adviser.