What is the SIP?
A SIP (Systematic Investment Plan) invests a fixed amount into a mutual fund every month, automatically. Instead of trying to time the market, you buy more units when prices are low and fewer when they are high — called rupee-cost averaging — and every instalment starts compounding from the day it is invested.
SIPs are the most popular way to invest in equity mutual funds in India because they start at just ₹500 a month, sync with your salary date, and quietly build serious wealth: ₹10,000 a month at 12% becomes roughly ₹50 lakh in 15 years — of which only ₹18 lakh is your own contribution.
Formula & worked example
The future value of a SIP with monthly investment M, monthly return i and N instalments is:
Worked example: ₹10,000/month for 15 years at 12% p.a. → i = 0.01, N = 180. FV = 10,000 × ((1.01)180 − 1)/0.01 × 1.01 ≈ ₹50.4 lakh, against ₹18 lakh invested. Stretch the same SIP to 25 years and it becomes ₹1.9 crore — the last 10 years create more wealth than the first 15, which is the whole point of starting early.
How to use this sip calculator
- Enter the monthly amount you can invest without touching your emergency fund.
- Set a realistic expected return — long-run Indian equity funds have averaged 11–14%; use 12% as a sensible planning number, 8–9% for hybrid, 6–7% for debt.
- Choose the period and open the year-by-year table to see when compounding really kicks in.
- Try the slider at +₹1,000 steps — small monthly increases have a surprisingly large end effect.
Smart tips
- Start now rather than perfectly: a ₹5,000 SIP started today beats a ₹10,000 SIP started 8 years later at typical horizons.
- Step up your SIP by 10% every year with your increment — a ₹10,000 SIP with 10% annual step-up grows to about ₹95 lakh in 15 years at 12%.
- Returns are not guaranteed or linear — equity SIPs need a 7+ year horizon to smooth out market cycles.
- Match the fund type to the goal: equity for 7+ years, hybrid for 3–7, debt/FD for under 3.
- Never stop a SIP in a market crash — those months buy the cheapest units and drive most of the final return.
Frequently asked questions
How does a SIP actually work?
A fixed amount is auto-debited every month and buys mutual-fund units at that day\u2019s NAV. Over time you accumulate units at many different prices, and the whole pot compounds at the fund\u2019s growth rate.
Is 12% a realistic SIP return?
Over 10–20 year periods, diversified Indian equity funds have historically delivered 11–14% annualised, so 12% is a common planning assumption. It is an average, not a promise — individual years swing widely, and you should also check results at 10%.
Can I lose money in a SIP?
In the short term yes — equity funds fall in market corrections. Historically, diversified equity SIPs held for more than 7–10 years have very rarely been negative, which is why SIPs suit long-term goals rather than next year\u2019s expenses.
What is better: SIP or lumpsum?
If you have a salary, a SIP fits naturally and removes timing risk. If you already hold a large amount of cash, investing it gradually over 6–12 months (or using our Lumpsum Calculator to compare) is a reasonable middle path.
Can I stop or change my SIP anytime?
Yes. SIPs in open-ended funds are fully flexible — you can pause, increase, reduce or redeem (exit loads and taxes may apply within short holding periods). There is no penalty like a bank RD.
How is SIP return taxed in India?
For equity funds, gains above ₹1.25 lakh a year on units held over 12 months are taxed at 12.5% (LTCG); shorter holdings at 20%. Each SIP instalment has its own holding period. Debt fund gains are taxed at your income slab.
Want the theory behind the numbers? Read our SIP & investing guides on the Money Blog.