Quick Answer: SIP (Systematic Investment Plan) returns use the compound interest formula: M = P × [(1+r)^n – 1] / r × (1+r), where P = monthly investment, r = monthly return rate (annual rate ÷ 12), n = number of months. A ₹10,000/month SIP at 12% p.a. for 10 years grows to approximately ₹23.2 lakh — on a total investment of ₹12 lakh, that is ₹11.2 lakh in returns.
SIP — India's Most Popular Way to Invest
A Systematic Investment Plan (SIP) allows investors to invest a fixed amount in mutual funds every month. The power of compounding and rupee cost averaging make SIP one of the most effective wealth-creation tools. Even small monthly amounts compound into significant corpus over 10–20 years.
Power of Compounding — SIP Examples
| Monthly SIP | 10 Years @ 12% | 20 Years @ 12% |
|---|---|---|
| ₹5,000 | ₹11.6 lakh invested → ₹23.2 lakh | ₹24 lakh invested → ₹1.97 crore |
| ₹10,000 | ₹12 lakh invested → ₹23.2 lakh | ₹24 lakh invested → ₹3.94 crore |
| ₹25,000 | ₹30 lakh invested → ₹58 lakh | ₹60 lakh invested → ₹9.85 crore |
Frequently Asked Questions
Rupee cost averaging means that when markets fall, your SIP buys more units at lower prices; when markets rise, fewer units at higher prices. Over time this averages out your cost per unit, reducing the impact of market volatility compared to a lump sum investment.
A step-up SIP (also called top-up SIP) increases the monthly SIP amount by a fixed percentage each year. For example, a ₹10,000 SIP with 10% step-up becomes ₹11,000 in year 2, ₹12,100 in year 3, etc. This matches increasing salary and dramatically boosts the final corpus.