SIP basics: how monthly investing grows
What a SIP is, how the growth is worked out, why a yearly step-up matters, and what a SIP calculator cannot tell you.
Try it: SIP calculatorWork out what a monthly SIP or a lump sum could grow to, with a yearly step-up and the value in today's money. Illustration only.A systematic investment plan, or SIP, is a fixed amount invested in a mutual fund every month, usually by auto-debit. It is not a product in itself. It is a way of buying units of a fund regularly instead of all at once.
How the growth is worked out
Calculators assume a steady yearly return. Each instalment is invested at the start of the month and grows at the monthly rate, which is the yearly return divided by 12. Early instalments have the longest time to grow, so time matters more than almost anything else.
With ₹10,000 a month for 15 years at a steady 12% a year, you would put in ₹18 lakh and the calculator would show about ₹50 lakh. The gap is growth on growth.
A yearly step-up makes a big difference
Most people earn more over time. Raising the SIP by a fixed percentage each year, a step-up, means the later and larger instalments still have years to grow. In the SIP calculator, try 0% and then 10% with the same starting amount to see the gap.
Think in today's money
₹50 lakh in fifteen years will not buy what ₹50 lakh buys today. Dividing by inflation shows what the total is worth in today's rupees, which is the number that matters for a goal.
What a calculator cannot tell you
Real funds do not grow at a steady rate. Some years fall and some rise sharply, and the order of those years changes the result. Fund expenses, exit loads and tax on gains also reduce what you keep. SEBI's own calculator says these tools are for illustration only and that it is not possible to predict the rate of return.
Mutual fund investments are subject to market risks; read all scheme related documents carefully. Saifu does not sell or recommend funds.
Sources
Rules, rates and limits change. Check the official source linked above before you rely on a figure here. Posts never contain referral or affiliate links from the writer.
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