What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan (SIP) is a disciplined way of investing in mutual
funds. It allows investors to invest a fixed amount regularly—typically monthly or
quarterly—into a mutual fund scheme.
Key Benefits of SIP
- Rupee Cost Averaging: You buy more units when markets are low and fewer
when they are high, averaging out your purchase cost over time.
- Power of Compounding: Reinvesting returns allows your money to grow
exponentially over long periods.
- Financial Discipline: Automating investments ensures you save before you
spend.
Understanding Systematic Withdrawal Plans (SWP)
An SWP allows you to withdraw a fixed amount from your mutual fund investments
at regular intervals. It is essentially the reverse of a SIP and is ideal for generating a
regular income stream, such as during retirement.
- Regular Income: Create your own "pension" from your accumulated corpus.
- Capital Appreciation: If the withdrawal rate is lower than the fund's
growth/return rate, your capital continues to grow even while you withdraw.
- Tax Efficiency: Withdrawals are treated as redemptions, attracting capital
gains tax only on the profit component of the withdrawn amount.
Inflation: The Silent Wealth Eater
When planning for long-term goals, it is crucial to account for inflation. A
corpus that looks huge today might lose significant purchasing power in 20 years.
The calculators on this page provide two key metrics:
- Nominal Value: The raw monetary value of your investment in the future.
- Real Value: The inflation-adjusted value, showing what that money could
actually buy in today's terms.
Why Start Early?
Time is your biggest asset. The magic of compounding works best when you give it time. Check out
our Strategies Section to see how delaying your investment by just 5
years can cost you lakhs!
SIP vs Fixed Deposit vs Gold
Historically, equity mutual funds (SIP) have outperformed traditional asset classes like Fixed
Deposits and Gold over the long term (10+ years).
| Asset Class |
Avg Return (10Y) |
Risk |
Liquidity |
| Equity SIP |
12% - 15% |
High |
High |
| Fixed Deposit |
6% - 7.5% |
Low |
Medium |
| Gold |
8% - 10% |
Medium |
High |
SIP Returns Matrix (Estimated @ 12%)
See how your money grows over time with consistent investing. Values are approximate.
| Duration |
₹10k/mo |
₹20k/mo |
₹30k/mo |
₹50k/mo |
₹1 Lakh/mo |
|
5 Years |
₹8.25 L |
₹16.5 L |
₹24.7 L |
₹41.2 L |
₹82.5 L |
|
10 Years |
₹23.2 L |
₹46.5 L |
₹69.7 L |
₹1.16 Cr |
₹2.32 Cr |
|
15 Years |
₹50.5 L |
₹1.01 Cr |
₹1.51 Cr |
₹2.52 Cr |
₹5.05 Cr |
|
20 Years |
₹99.9 L |
₹2.00 Cr |
₹3.00 Cr |
₹5.00 Cr |
₹9.99 Cr |
|
25 Years |
₹1.90 Cr |
₹3.80 Cr |
₹5.70 Cr |
₹9.49 Cr |
₹18.9 Cr |
|
30 Years |
₹3.53 Cr |
₹7.06 Cr |
₹10.6 Cr |
₹17.6 Cr |
₹35.3 Cr |
Investment Strategies to Maximize Wealth
Investing is not
just about choosing the right fund; it's about the discipline and strategy you use. Here are
powerful concepts that can supercharge your returns.
1. The Cost of Delay (Power of Compounding)
Compound interest is often called the eighth wonder of the world. The earlier you start, the
more time your money has to grow on itself. Delaying your investment by just a few years can
cost you significantly in the long run.
Key Insight: Starting 10 years earlier can often result in double the
corpus, even if you invest the same monthly amount!
In the chart above, you can see how Starter A ends up with a significantly
larger corpus by starting at age 25, compared to Starter B who starts at
35, even though both invest until age 60.
2. Step-Up SIP (Top-Up SIP)
As your income grows, your investments should grow too. A Step-Up SIP involves increasing
your SIP amount by a fixed percentage (e.g., 10%) every year. This small change combats
inflation and drastically increases your final corpus.
| Metric |
Regular SIP (₹10k/mo) |
10% Step-Up SIP |
| Duration |
20 Years |
20 Years |
| Total Invested |
₹24 Lakhs |
₹68.7 Lakhs |
| Final Corpus (@12%) |
₹99.9 Lakhs |
₹2.05 Crores |
3. Rupee Cost Averaging
One of the biggest fears investors have is "Is this the right time to invest?". Rupee Cost
Averaging makes this question irrelevant.
By investing a fixed amount regularly, you buy more units when the market is low and fewer
units when the market is high.
Example Scenario
Investing ₹5,000 every month for 4 months:
| Month |
NAV (Price per unit) |
Units Bought |
| Jan |
₹50 (Market High) |
100 |
| Feb |
₹40 (Market Crash) |
125 |
| Mar |
₹25 (Market Bottom) |
200 |
| Apr |
₹45 (Recovery) |
111 |
| Total |
Avg NAV: ₹40 |
Total Units: 536 |
At the end, with market at ₹45 (lower than start), your value is 536 units * ₹45 =
₹24,120 (Profit), even though market is down from peak!
Frequently Asked Questions
What is the ideal amount to start a SIP?
You can start a SIP with as little as ₹500 per month. The ideal amount depends on your
financial goals. Use the calculator above to reverse-engineer your required monthly
investment based on your target corpus.
Can I stop my SIP anytime?
Yes, SIPs are flexible. You can stop, pause, or increase your SIP amount at any time without
penalty (exit loads may apply if you redeem units within a specific period, usually 1 year).
Is SIP better than a lump sum?
SIP is generally safer for volatile markets as it averages out cost. Lump sum investments are
beneficial when markets are low, but timing the market is difficult. SIP eliminates the need
for market timing.