What is a SIP?
A SIP (Systematic Investment Plan) is a way of investing a fixed amount into a mutual fund every month, automatically. Instead of trying to time the market with a lump sum, you buy units at whatever the price is each month — more units when markets are down, fewer when they are up. This averaging, plus the discipline of investing every month, is why SIPs have become the default way Indians invest in equity funds.
SIPs can start from as little as ₹500 per month, can be paused or stopped anytime, and carry no penalty for stopping — unlike insurance-linked products that are often mis-sold as investments.
How SIP returns are calculated
This calculator uses the standard future-value formula: FV = P × ((1 + i)ⁿ − 1) ÷ i × (1 + i), where P is your monthly investment, i is the monthly rate of return (annual return ÷ 12 ÷ 100) and n is the number of monthly instalments.
For example, ₹10,000 per month for 15 years at 12% per year grows to about ₹50 lakh — of which only ₹18 lakh is money you actually invested. The remaining ₹32 lakh is compounding doing the work. Stretch the same SIP to 25 years and it becomes roughly ₹1.9 crore, which is why starting early matters more than starting big.
What return should you assume?
Nobody can promise a return, and this calculator's output is a projection, not a guarantee. Historically, broad Indian equity index funds have delivered around 11–13% per year over long periods, but with big swings along the way — including years of negative returns.
A sensible approach: use 12% for long-term equity funds, 7–8% for debt funds, and something in between for hybrid funds. If a projection only 'works' at 15%+, your plan is too optimistic.
Getting more out of your SIP
Three habits reliably improve real-world SIP outcomes:
- Increase your SIP every year as your income grows (a 'step-up SIP'). Even a 10% annual increase can roughly double your final corpus over 20 years.
- Don't stop SIPs during market crashes — those months buy you the most units and drive most of your long-term returns.
- Prefer low-cost direct plans of index funds or well-chosen funds; a 1% saving in fees compounds into lakhs over decades.
Frequently asked questions
›Is SIP better than a fixed deposit?
They serve different purposes. FDs give guaranteed but lower returns (typically 6–8%) and suit short-term goals. Equity SIPs have historically returned more over 7+ year periods but can lose money in the short term. Many investors use both: FDs for safety, SIPs for long-term growth.
›Can I lose money in a SIP?
Yes, in the short term. Equity mutual funds fall when markets fall, and a SIP does not prevent that. What a SIP does is average your purchase price over time, which historically has worked well for investors who stay invested for 7 years or longer.
›What is a good monthly SIP amount?
A common guideline is to invest 20–30% of your take-home income across all savings, with the long-term portion in SIPs. More useful than any rule: work backwards from a goal using this calculator, and start with whatever you can sustain — you can step it up every year.
›Is SIP tax-free?
No. Equity fund gains held over one year are taxed as long-term capital gains at 12.5% above ₹1.25 lakh of gains per year (as per current rules). ELSS funds offer a tax deduction under Section 80C with a 3-year lock-in. Tax rules change, so check current rates before filing.
›Does this calculator account for step-up SIPs or inflation?
This version projects a fixed monthly SIP. A step-up SIP will grow your corpus faster than shown. For a rough inflation-adjusted view, use a lower return — e.g. 12% expected return with 6% inflation is close to using 6% here.