Monthly SIP · Lump Sum · Wealth projection · Step-up SIP · FD comparison · Crore target planner
What is SIP and How Does It Work?
A Systematic Investment Plan (SIP) lets you invest a fixed amount in a mutual fund at regular intervals — typically monthly. Instead of trying to time the market with a lump sum, SIP uses rupee cost averaging — you buy more units when prices are low and fewer when prices are high, reducing your average cost over time.
Power of SIP — Real Numbers
- ₹5,000/month for 20 years at 12% → Invested: ₹12 lakh → Maturity: ₹49.96 lakh (4x)
- ₹5,000/month for 30 years at 12% → Invested: ₹18 lakh → Maturity: ₹1.76 crore (9.8x)
- ₹10,000/month for 20 years at 15% → Invested: ₹24 lakh → Maturity: ₹1.51 crore (6.3x)
- Starting 10 years earlier doubles your final corpus — compounding rewards patience most
Step-Up SIP — The Smartest Strategy
Step-up SIP increases your monthly contribution by a fixed percentage each year — usually 10–15% in line with salary hikes. This is dramatically more powerful than a flat SIP. Starting at ₹5,000/month and stepping up 10% annually for 20 years gives you nearly 3x the corpus of a flat ₹5,000 SIP.
Choosing the Right Mutual Fund Category
- Large Cap Funds — Lower risk, 10–13% historical CAGR. Suitable for 5+ year horizon.
- Flexi/Multi Cap Funds — Balanced risk, 12–15% historical CAGR. Most popular for SIP.
- Mid Cap Funds — Higher risk, 14–18% historical CAGR. Best for 10+ year horizon.
- Small Cap Funds — Highest risk, 15–20% historical CAGR potential. Only for 15+ years.
- Index Funds (Nifty 50) — Lowest cost, ~12% historical CAGR. Excellent for beginners.
Frequently Asked Questions
Is SIP better than FD (Fixed Deposit)?
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Over long periods (10+ years), equity SIPs have historically outperformed FDs significantly. A typical FD gives 6–7% per year (fully taxable), while equity mutual fund SIPs have delivered 12–15% CAGR historically. On ₹5,000/month over 20 years: FD at 7% gives ₹26 lakh, while SIP at 12% gives ₹49 lakh. However, FDs are capital-protected while mutual funds carry market risk. For goals under 3 years, FD is safer. For goals over 5–7 years, SIP generally wins.
What is ELSS and is it good for tax saving?
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ELSS (Equity Linked Savings Scheme) is a type of mutual fund that qualifies for ₹1.5 lakh deduction under Section 80C — but only under the old tax regime. It has a 3-year lock-in period (shortest among 80C instruments) and has historically delivered 12–15% CAGR. If you're in the old tax regime, ELSS via SIP is arguably the best 80C instrument — you save tax AND build wealth simultaneously.
Can I stop or pause a SIP?
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Yes — most mutual funds allow you to pause, reduce, or stop your SIP anytime without penalty (except ELSS which has a 3-year lock-in). Your existing units remain invested and continue to grow. You can restart anytime. However, stopping a SIP early significantly impacts your final corpus due to the loss of compounding on future contributions.