Published on February 6th, 2025
Today, investing through systematic investment plans (SIP) in equity mutual funds has become one of the surest methods of creating wealth in the long run.
The beauty of SIPs is that they do away with the need to time the market. When it comes to SIPs, time matters more than timing.
SIPs are also about discipline. You start with your goals and then work your asset allocation backwards. Then, you decide how much you need to invest in monthly SIPs.
This forces you to save early, as SIP becomes the target, and you build your savings and expenditure budget around that.
However, the big reason why SIPs are popular is that they offer rupee cost averaging.
If you bought a portfolio of frontline stocks when the index was 25,000 and after 3 years, it went down by 15% and came back to the same level, then your lumpsum investment may not show much growth.
However, the SIP would have also accumulated units when the markets were down, so the average cost would be lower.
The way rupee cost averaging works is that you get more value when markets are up, and you get more units when the markets are down.
It is like “Heads I win, Tails I don’t lose.” You can also use a mutual fund calculator available on various financial websites or even an Excel mutual fund return calculator to estimate how much your SIP would be worth based on assumptions. Here, we will look at 3 SIP assumptions.
How Will Wealth Grow If You Invest ₹5,000 Sip For 10 Years?
In our first case study, we take a monthly SIP of ₹5,000 and assume it compounds at a 14% return.
We then use the Mutual fund calculator in an Excel sheet to estimate how much the SIP grows in 10 years.
We can also verify this with an online mutual fund return calculator that is available on the SBI Mutual Fund website.
| Month | Opening Balance | Monthly SIP | Monthly Return | Closing Value |
| Month 1 | 0.00 | 5,000 | 54.90 | 5,054.90 |
| Month 6 | 25,835.58 | 5,000 | 338.54 | 31,174.12 |
| Month 12 | 58,759.00 | 5,000 | 700.01 | 64,459.01 |
| Month 18 | 93,911.62 | 5,000 | 1,085.95 | 99,997.57 |
| Month 24 | 1,31,444.38 | 5,000 | 1,498.02 | 1,37,942.40 |
| Month 30 | 1,71,518.44 | 5,000 | 1,938.00 | 1,78,456.43 |
| Month 36 | 2,14,305.86 | 5,000 | 2,407.76 | 2,21,713.62 |
| Month 42 | 2,59,990.37 | 5,000 | 2,909.33 | 2,67,899.70 |
| Month 48 | 3,08,768.12 | 5,000 | 3,444.86 | 3,17,212.98 |
| Month 54 | 3,60,848.55 | 5,000 | 4,016.65 | 3,69,865.20 |
| Month 60 | 4,16,455.28 | 5,000 | 4,627.16 | 4,26,082.44 |
| Month 66 | 4,75,827.07 | 5,000 | 5,279.00 | 4,86,106.07 |
| Month 72 | 5,39,218.86 | 5,000 | 5,974.98 | 5,50,193.84 |
| Month 78 | 6,06,902.82 | 5,000 | 6,718.08 | 6,18,620.90 |
| Month 84 | 6,79,169.58 | 5,000 | 7,511.50 | 6,91,681.08 |
| Month 90 | 7,56,329.44 | 5,000 | 8,358.64 | 7,69,688.07 |
| Month 96 | 8,38,713.69 | 5,000 | 9,263.13 | 8,52,976.82 |
| Month 102 | 9,26,676.08 | 5,000 | 10,228.87 | 9,41,904.95 |
| Month 108 | 10,20,594.30 | 5,000 | 11,260.00 | 10,36,854.30 |
| Month 114 | 11,20,871.60 | 5,000 | 12,360.94 | 11,38,232.54 |
| Month 120 | 12,27,938.55 | 5,000 | 13,536.43 | 12,46,474.98 |
The table above has been entirely simulated in Excel. If you invest ₹5,000 a month in an equity mutual fund SIP at about 14% compounding per year, then over 10 years, your total outlay is ₹6.00 lakhs.
This amount has grown to ₹12.46 lakhs. Effectively, you have contributed less than half, and the balance comes from SIP returns.
Read More: 8 Investment Options To Consider When Saving For A Longer Time
How Will Wealth Grow If You Invest ₹10,000 Sip For 10 Years?
In our second case study, we take a monthly SIP of ₹10,000 and assume it compounds at a 14% return.
We then use the Mutual fund calculator in an Excel sheet to estimate how much the SIP grows in 10 years.
We can also verify the same with an online Mutual Fund Return Calculator that is available on the website of SBI Mutual Fund. Monthly compounding factor has been used in all cases.
| Month | Opening Balance | Monthly SIP | Monthly Return | Closing Value |
| Month 1 | 0.00 | 10,000 | 109.79 | 10,109.79 |
| Month 6 | 51,671.16 | 10,000 | 677.09 | 62,348.24 |
| Month 12 | 1,17,517.99 | 10,000 | 1,400.02 | 1,28,918.01 |
| Month 18 | 1,87,823.23 | 10,000 | 2,171.90 | 1,99,995.14 |
| Month 24 | 2,62,888.76 | 10,000 | 2,996.05 | 2,75,884.80 |
| Month 30 | 3,43,036.88 | 10,000 | 3,875.99 | 3,56,912.87 |
| Month 36 | 4,28,611.72 | 10,000 | 4,815.52 | 4,43,427.24 |
| Month 42 | 5,19,980.74 | 10,000 | 5,818.66 | 5,35,799.40 |
| Month 48 | 6,17,536.23 | 10,000 | 6,889.72 | 6,34,425.96 |
| Month 54 | 7,21,697.09 | 10,000 | 8,033.30 | 7,39,730.40 |
| Month 60 | 8,32,910.56 | 10,000 | 9,254.32 | 8,52,164.87 |
| Month 66 | 9,51,654.15 | 10,000 | 10,558.00 | 9,72,212.15 |
| Month 72 | 10,78,437.72 | 10,000 | 11,949.96 | 11,00,387.67 |
| Month 78 | 12,13,805.64 | 10,000 | 13,436.16 | 12,37,241.81 |
| Month 84 | 13,58,339.17 | 10,000 | 15,023.00 | 13,83,362.16 |
| Month 90 | 15,12,658.88 | 10,000 | 16,717.27 | 15,39,376.15 |
| Month 96 | 16,77,427.38 | 10,000 | 18,526.27 | 17,05,953.65 |
| Month 102 | 18,53,352.16 | 10,000 | 20,457.74 | 18,83,809.91 |
| Month 108 | 20,41,188.59 | 10,000 | 22,520.00 | 20,73,708.59 |
| Month 114 | 22,41,743.19 | 10,000 | 24,721.89 | 22,76,465.08 |
| Month 120 | 24,55,877.09 | 10,000 | 27,072.86 | 24,92,949.96 |
The table above has been entirely simulated in excel. If you invest ₹10,000 a month in an equity mutual fund SIP at about 14% compounding per year, then over a period of 10 years, your total outlay is ₹12.00 lakhs.
This amount has grown to ₹24.93 lakhs. Effectively, you have contributed less than half and the balance has come from SIP returns.
Read More: 10 Ways To Make More Money While Sitting At Home
How Will Wealth Grow If You Invest ₹10,000 Sip For 10 Years?
In our third case study, we take a monthly SIP of ₹15,000 and assume that it compounds at 14% return.
We then use the Mutual fund calculator in an excel sheet to estimate how much the SIP grows to in 10 years.
We can also verify the same with an online Mutual Fund Return Calculator that is available on the website of SBI Mutual Fund. Monthly compounding factor has been used in all cases.
| Month | Opening Balance | Monthly SIP | Monthly Return | Closing Value |
| Month 1 | 0.00 | 15,000 | 164.69 | 15,164.69 |
| Month 6 | 77,506.74 | 15,000 | 1,015.63 | 93,522.37 |
| Month 12 | 1,76,276.99 | 15,000 | 2,100.03 | 1,93,377.02 |
| Month 18 | 2,81,734.85 | 15,000 | 3,257.85 | 2,99,992.70 |
| Month 24 | 3,94,333.14 | 15,000 | 4,494.07 | 4,13,827.21 |
| Month 30 | 5,14,555.31 | 15,000 | 5,813.99 | 5,35,369.30 |
| Month 36 | 6,42,917.58 | 15,000 | 7,223.28 | 6,65,140.86 |
| Month 42 | 7,79,971.11 | 15,000 | 8,727.99 | 8,03,699.09 |
| Month 48 | 9,26,304.35 | 15,000 | 10,334.58 | 9,51,638.93 |
| Month 54 | 10,82,545.64 | 15,000 | 12,049.95 | 11,09,595.59 |
| Month 60 | 12,49,365.84 | 15,000 | 13,881.47 | 12,78,247.31 |
| Month 66 | 14,27,481.22 | 15,000 | 15,837.00 | 14,58,318.22 |
| Month 72 | 16,17,656.57 | 15,000 | 17,924.94 | 16,50,581.51 |
| Month 78 | 18,20,708.47 | 15,000 | 20,154.24 | 18,55,862.71 |
| Month 84 | 20,37,508.75 | 15,000 | 22,534.49 | 20,75,043.25 |
| Month 90 | 22,68,988.32 | 15,000 | 25,075.91 | 23,09,064.22 |
| Month 96 | 25,16,141.08 | 15,000 | 27,789.40 | 25,58,930.47 |
| Month 102 | 27,80,028.24 | 15,000 | 30,686.62 | 28,25,714.86 |
| Month 108 | 30,61,782.89 | 15,000 | 33,780.00 | 31,10,562.89 |
| Month 114 | 33,62,614.79 | 15,000 | 37,082.83 | 34,14,697.62 |
| Month 120 | 36,83,815.64 | 15,000 | 40,609.30 | 37,39,424.94 |
The table above has been simulated in excel. If you invest ₹15,000 a month in an equity mutual fund SIP at about 14% compounding per year, then over a period of 10 years, your total outlay is ₹18.00 lakhs.
This amount has grown to ₹37.39 lakhs. Effectively, you have contributed less than half and the balance has come from SIP returns.
Did We MIS Something In This Story?
In all the above cases, we can see that wealth ratio is about 2.1X in all the cases. That is because the size of the SIP has less of a role to play in the wealth creation ratio.
The key is time. Let us assume that the same ₹5,000 is invested at the same rate for 20 years instead of 10 years. In this case, an outlay of ₹36 lakhs grows to ₹176.02 lakhs, which is a wealth ratio of 4.9X.
What happens if we look at 30 years instead of 20 years with a monthly SIP of ₹5,000. In this case, an outlay of ₹54 lakhs grows to ₹689.94 lakhs, which is a wealth ratio of 12.8X.
In short as the tenure expands, the wealth ratio also expands proportionately.
That is because, it is only after the sixth or seventh year that the power of compounding starts and continues to pick up pace progressively. That is the real power of a SIP.
