What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan (SIP) is the most popular method for investing in mutual funds. Instead of investing a large sum at once, SIP allows you to invest a fixed amount regularly (typically monthly), making investment planning accessible to everyone regardless of income level.
When you start investing in mutual funds through SIP, you benefit from rupee cost averaging - buying more units when prices are low and fewer when prices are high. Combined with the power of compounding, even small monthly investments can grow into substantial wealth over time.
Our SIP return calculator helps you visualize this growth by showing how your investments compound over different time periods, making your investment planning more effective and goal-oriented.
How Does the SIP Return Calculator Work?
Our return calculator uses the compound interest formula to estimate your investment growth when investing in mutual funds. It calculates returns monthly, which is how mutual funds actually work. Simply enter your monthly contribution, expected return rate, and investment duration to see your projected corpus.
SIP Calculation Formula - The Power of Compounding
FV = P × [(1+r)^n - 1] / r × (1+r)
- FV = Future Value (your corpus from investing in mutual funds)
- P = Monthly SIP amount
- r = Monthly rate (expected return ÷ 12)
- n = Total number of months
This formula captures the power of compounding - where your returns earn returns. For step-up SIP, the monthly contribution increases annually, supercharging your investment planning strategy.
Investment Planning Examples with SIP
See how the power of compounding works when investing in mutual funds through a systematic investment plan (SIP). These examples use 12% expected return, which is typical for equity mutual funds.
₹5,000 Monthly SIP for 10 Years
Total Investment: ₹6,00,000
Expected Return (12%): ₹11,61,695
Wealth Gain: ₹5,61,695
The power of compounding nearly doubles your money in 10 years when investing in mutual funds!
₹10,000 Monthly SIP for 20 Years
Total Investment: ₹24,00,000
Expected Return (12%): ₹99,91,479
Wealth Gain: ₹75,91,479
Long-term investment planning with SIP can turn ₹24 lakhs into nearly ₹1 crore!
Benefits of Investing in Mutual Funds Through SIP
Power of Compounding
The power of compounding is the secret to wealth creation. Your returns earn returns, creating exponential growth. When investing in mutual funds through SIP, the longer you stay invested, the more powerful compounding becomes. Starting early with even small amounts leads to significant wealth.
Rupee Cost Averaging
A systematic investment plan (SIP) automatically buys more units when prices are low and fewer when high. This averages your cost over time, reducing the impact of market volatility on your investment planning and removing the need to time the market.
Disciplined Investment Planning
SIP automates your investment planning, removing emotional decision-making. You invest consistently regardless of market conditions - a strategy that has historically proven successful for long-term wealth creation when investing in mutual funds.
Flexible Expected Returns
Start with as little as ₹500 per month. Adjust your SIP amount anytime based on your expected return goals. No lock-in for most funds. Our return calculator helps you plan for different scenarios and expected return rates.
Step-Up SIP: Maximize the Power of Compounding
Step-up SIP is an advanced investment planning strategy where you increase your systematic investment plan (SIP) amount annually. This mirrors salary growth and significantly boosts your expected return through enhanced power of compounding.
Step-Up SIP Example: 10% Annual Increase
| Year | Monthly SIP | Annual Investment |
|---|---|---|
| Year 1 | ₹5,000 | ₹60,000 |
| Year 2 | ₹5,500 | ₹66,000 |
| Year 3 | ₹6,050 | ₹72,600 |
| Year 5 | ₹7,320 | ₹87,846 |
| Year 10 | ₹11,790 | ₹1,41,477 |
With 10% step-up, your investment planning becomes more powerful. A ₹5,000 SIP for 10 years at 12% expected return grows to approximately ₹15.8 lakhs compared to ₹11.6 lakhs with fixed SIP - that's 36% more wealth from the enhanced power of compounding!
Expected Return Guide for Mutual Funds
Choosing the right expected return is crucial for realistic investment planning. Here's a guide based on historical performance when investing in mutual funds:
| Fund Category | Expected Return (Annual) | Risk Level |
|---|---|---|
| Large Cap Equity | 10-12% | Moderate |
| Mid Cap Equity | 12-15% | High |
| Small Cap Equity | 14-18% | Very High |
| Balanced/Hybrid | 9-11% | Moderate |
| Debt Funds | 6-8% | Low |
Use our return calculator with different expected return rates to see how your systematic investment plan (SIP) performs under various scenarios. Remember, past performance doesn't guarantee future returns.
Frequently Asked Questions
What is the minimum amount to start investing in mutual funds through SIP?
Most mutual funds allow systematic investment plan (SIP) starting from ₹500 per month. Some funds even offer ₹100 SIP options. There's no maximum limit - your investment planning can scale based on your financial goals and capacity.
Is SIP better than lumpsum for investing in mutual funds?
A systematic investment plan (SIP) is generally better for regular income earners as it provides rupee cost averaging and removes the need to time the market. Lumpsum can be better if you have a large amount and markets are at attractive valuations. Many investors use both strategies in their investment planning.
How does the return calculator account for the power of compounding?
Our return calculator compounds your expected return monthly, which is how mutual funds actually work. Each month's gains are added to your principal, and next month's returns are calculated on this larger amount. This is the power of compounding in action - your money grows exponentially over time.
What expected return should I use for investment planning?
For equity mutual funds, 12% expected return is a reasonable assumption for long-term investment planning. Large-cap funds typically deliver 10-12%, mid-cap 12-15%, and small-cap 14-18%. For conservative investment planning, use lower expected return rates.
Can I stop or modify my systematic investment plan (SIP)?
Yes, SIP offers complete flexibility for your investment planning. You can increase, decrease, pause, or stop your SIP anytime without penalty (except ELSS funds with 3-year lock-in). Your existing investments continue to benefit from the power of compounding even if you stop future contributions.
How is SIP taxed when investing in mutual funds in India?
For equity funds held over 1 year, gains up to ₹1 lakh are tax-free; above that, 10% LTCG applies. For debt funds, gains are taxed at your slab rate. Each SIP installment is treated as a separate investment for calculating holding period - important for your investment planning.
Tips for Successful Investment Planning with SIP
- 1.Start Early to Maximize Power of Compounding: Even small amounts invested early grow significantly. A 25-year-old investing ₹5,000/month will have more wealth at 60 than a 35-year-old investing ₹10,000/month - that's the power of compounding!
- 2.Stay Invested During Market Falls: When investing in mutual funds through SIP, market corrections are opportunities. Don't stop your systematic investment plan during downturns - that's when rupee cost averaging works best.
- 3.Use Step-Up SIP for Better Expected Returns: Increase your SIP by 10% annually. This simple investment planning habit can increase your final corpus by 30-50% over 15-20 years through enhanced power of compounding.
- 4.Choose Direct Plans for Higher Expected Returns: Direct mutual fund plans have lower expense ratios, which can add 0.5-1% to your expected return over time when investing in mutual funds.
- 5.Review Your Investment Planning Annually: Check your fund's performance against its benchmark. Use our return calculator to adjust your systematic investment plan (SIP) if needed. Switch only if there's consistent underperformance over 2-3 years.