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Investing guide

How SIP turns small amounts into significant wealth.

The power of compounding over time

Albert Einstein reportedly called compound interest "the eighth wonder of the world." With a SIP, your monthly contributions earn returns, and those returns earn their own returns. The mathematical effect is exponential — not linear. A $1,000/month SIP at 12% annual returns produces roughly:

• After 10 years: $231,000 invested grows to ~$230k
• After 20 years: $240,000 invested grows to ~$990k
• After 30 years: $360,000 invested grows to ~$3.5M

Notice that doubling the time period from 15 to 30 years doesn't double the final corpus — it multiplies it by roughly 7-8×. This non-linear acceleration is the defining feature of compounding and the reason financial advisors consistently emphasize starting early over starting big.

Dollar-cost averaging: SIP's hidden advantage

A fixed monthly SIP naturally implements Dollar-Cost Averaging (DCA). When markets fall, your fixed monthly amount buys more units at a lower price. When markets rise, you buy fewer units. Over many years, this smooths out the average purchase cost and reduces the risk of a poor entry point devastating your returns. A lump-sum investor who put all their money in at a market peak may wait years to break even; a SIP investor in the same fund continues accumulating units throughout the correction at favorable prices.

The 15-15-15 rule explained

A popular SIP heuristic: invest $15,000/month for 15 years at 15% annual returns, and you will accumulate approximately $1 crore (~$1M). This illustrates how a modest monthly commitment, sustained through a market cycle, can create significant wealth through compounding alone. Use this calculator to adapt the rule to your own numbers.

How to choose your expected return rate

The expected return rate is the most uncertain input. Practical guidance:

• 8–9% (conservative): Use for balanced funds, bond-heavy portfolios, or if you want a margin of safety in your projections.
• 10–12% (moderate): Consistent with long-term average equity index fund returns in most major markets (S&P 500, Nifty 50). Most financial plans use 10% or 12% as the benchmark.
• 14–18% (aggressive): Only appropriate for long-horizon plans with predominantly small-cap or emerging market exposure. Higher variance; use cautiously.

Run your numbers at both 10% and 12% to get a conservative-to-moderate range. Plan for the lower number, and treat anything above it as upside.