A Systematic Investment Plan (SIP) lets you invest a fixed amount in a mutual fund every month. It's the simplest, most disciplined way for everyday Indians to build long-term wealth — and the math behind it is genuinely powerful.
What is a SIP?
Instead of investing a large lump sum at once, a SIP spreads your investment over time — say ₹5,000 every month. This brings two big advantages: discipline (you invest automatically) and rupee-cost averaging (you buy more units when prices are low and fewer when high).
How SIP Returns Are Calculated
Each monthly instalment earns returns from the date it's invested. The future value of a SIP uses this formula:
FV = P × [(1 + i)n − 1] ÷ i × (1 + i)
- P = monthly investment
- i = monthly rate of return
- n = number of months
The Power of Compounding
Here's what makes SIPs magical. Investing ₹5,000/month for 20 years at 12% gives you roughly ₹50 lakh — even though you only invested ₹12 lakh of your own money. The other ~₹38 lakh is pure compounding.
| Monthly SIP | 20 yrs @ 12% | You invested |
|---|---|---|
| ₹2,000 | ~₹20 lakh | ₹4.8 lakh |
| ₹5,000 | ~₹50 lakh | ₹12 lakh |
| ₹10,000 | ~₹1 crore | ₹24 lakh |
📈 See your own SIP growth
Try our free SIP calculator with interactive charts showing exactly how your money grows year by year.
Open SIP Calculator →Step-up SIP: Grow With Your Income
A step-up SIP increases your investment amount every year (say by 10%) as your salary grows. This single tweak can nearly double your final corpus compared to a flat SIP — try the Step-up SIP calculator to see the difference.
Common SIP Mistakes to Avoid
- Stopping during market falls — that's exactly when your SIP buys cheap units.
- Chasing last year's top fund — pick consistent, diversified funds.
- Starting too small for too long — step up as income grows.
- Not linking SIPs to goals — tie each SIP to a target like retirement or a child's education.