What is SIP?
SIP (Systematic Investment Plan) is a method of investing a fixed amount in a mutual fund at regular intervals — typically monthly. It is one of the most popular investment tools in India, with over 9 crore active SIP accounts as of 2026. SIP makes equity investing accessible, disciplined, and automatic.
How is SIP Return Calculated?
SIP uses the future value of an annuity formula. Each monthly investment earns compounded returns for its remaining period in the fund.
FV = P × ((1 + r)^n − 1) / r × (1 + r)
P = Monthly SIP amount
r = Monthly return rate (Annual rate ÷ 12 ÷ 100)
n = Total months (Years × 12)
SIP Calculation Example
Suppose you invest ₹10,000/month for 15 years at 12% annual return:
Monthly SIP: ₹10,000
Duration: 15 years (180 months)
Expected return: 12% p.a.
Total invested: ₹18,00,000
Estimated corpus: ₹50,45,760
Wealth gained: ₹32,45,760
Who Should Start a SIP?
SIP is ideal for salaried professionals with regular monthly income who want to build long-term wealth without worrying about market timing. It suits first-time investors, those saving for goals like a house, child's education, or retirement, and anyone wanting equity exposure without lumpsum risk.
Benefits of SIP Investment
Rupee Cost Averaging: You buy more units when markets are low and fewer when high, reducing average cost. Power of Compounding: Returns compound monthly, growing wealth dramatically over 10–20 years. Discipline: Auto-debit from your bank ensures consistent investing. Flexibility: Start with ₹500, increase or pause anytime, no lock-in for most funds.
SIP vs Lumpsum
SIP wins during volatile or sideways markets by averaging cost. Lumpsum wins in sustained bull markets because the entire amount compounds from Day 1. For salaried investors receiving monthly income, SIP is more practical. For an annual bonus or windfall, lumpsum is an option.
Related Calculators
Want to boost SIP results? Check our Step-Up SIP Calculator to see the impact of increasing SIP by 10% yearly. Compare with Lumpsum Calculator for one-time investments. Use our FIRE Calculator to see when your SIP corpus can fund early retirement.
Frequently Asked Questions
What is SIP and how does it work? ⌄
SIP (Systematic Investment Plan) is a method of investing a fixed amount in a mutual fund at regular intervals — usually monthly. Each instalment buys units at the prevailing NAV. Over time, you accumulate units at different prices, which averages your cost (Rupee Cost Averaging) and reduces timing risk.
How is SIP return calculated? ⌄
SIP uses the future value of annuity formula: FV = P × ((1+r)^n - 1) / r × (1+r), where each monthly investment grows for its remaining period. Early instalments grow much more than later ones due to compounding.
What is a good SIP return rate to expect? ⌄
Nifty 50 index funds have delivered 11–13% CAGR over 15+ years. Large-cap funds: 10–12%. Mid-cap funds: 13–16%. Small-cap funds: 14–18% over long periods. For conservative planning, use 10–12% as your expected return.
Is SIP better than lumpsum investment? ⌄
SIP averages cost through Rupee Cost Averaging, removes market timing risk, and builds investment discipline. Lumpsum can outperform in sustained bull markets. For most salaried investors with monthly income, SIP is more practical and psychologically easier to sustain.
How much should I invest in SIP monthly? ⌄
A common guideline is 20% of take-home salary. You can start with as little as ₹500/month. Consistency matters far more than the initial amount. Consider increasing your SIP by 10% every year (Step-Up SIP) to dramatically increase your final corpus.
Can I stop or pause a SIP? ⌄
Yes. Most mutual funds allow you to pause SIP for 1–3 months or stop permanently at any time without penalty. The invested units remain and continue to earn returns. You can restart anytime. There is no exit load for SIP redemption after 1 year in most equity funds.