SIP, in plain English
A SIP is an auto-debit into a mutual fund — same amount, same date, every month. Some months you buy units when the market is high. Some months you buy when it's tanked. Over time, your average cost smooths out. That's the whole pitch: you don't have to guess when to invest.
It works because two things stack: you keep showing up, and the gains earn gains. Year one feels boring. Year ten feels obvious. Year twenty feels like cheating.
SIP vs Lumpsum — who picks which
SIP suits salaried investors investing month-by-month. Lumpsum suits anyone with a windfall — bonus, inheritance, property sale — but timing risk is real. Historically, in steadily rising markets, lumpsum beats SIP because the money compounds longer. But most people don't have ₹6L sitting idle, and dropping it in right before a correction stings. If you have the cash and the stomach, lumpsum. If you have a salary, SIP. Toggle the mode above to see both on your numbers.
Three real examples
- Monthly investor: ₹10k/month for 15 years at 12% → ~₹50L corpus, ~₹32L of which is gains. You put in ₹18L, the market did the rest.
- Long-term saver: ₹25k/month for 25 years at 11% → ~₹3.4Cr corpus. The last 5 years alone add more than the first 15 combined — that's compounding doing its thing.
- First-timer: Even ₹2k/month for 5 years gets you ~₹1.6L. The habit matters more than the amount early on. Start small, then step up when your salary does.
Step-up SIP — is it worth it?
Step-up means you raise your monthly amount by a fixed % every year. Your salary goes up 8–10% anyway — your SIP should too. A flat ₹10k SIP and a ₹10k SIP that grows 10%/year both start the same. After 20 years, the second one ends up roughly double. Run the numbers in our Step-up SIP Calculator, or work backwards from a target with the Goal SIP Calculator.
The formula (if you care)
For the curious: future value of a monthly SIP is M = P × [((1+i)^n − 1) / i] × (1+i), where P is the monthly amount, i is the monthly rate (annual ÷ 12 ÷ 100), and n is months. You don't need to memorise it — the calculator runs it for you.
Tax — one mention, then we're done
For equity funds (and ELSS): long-term gains above ₹1.25 Lakh/year are taxed at 12.5%. Hold for under a year and short-term gains hit 20%. Debt funds bought after April 2023 are taxed at your slab. That's the headline. The calculator applies the LTCG exemption automatically.
How to actually get more out of your SIP
- Start now, not next quarter. The early years aren't impressive — they're the foundation.
- Don't stop when markets fall. That's when your same ₹10k buys more units. Stopping then is the most expensive mistake retail investors make.
- Step it up yearly. 10% bump matches a normal raise and roughly doubles your end corpus.
- Check it once a year. Twelve times a year is anxiety, not investing.
- Short goal (under 5 years)? Don't use equity SIP. Park it in FD, RD, or short-term debt.
- Planning to draw an income later? Pair your SIP with an SWP for the withdrawal phase.
Frequently Asked Questions
What return rate is realistic to assume?
Use 11–12% for equity funds over a 10+ year horizon — that's roughly what Indian equity has done historically. Be more conservative for shorter horizons. 8% is a safe planning number; 15% is hopeful, not reliable. Past returns are not a promise.
Should I stop my SIP if the market is falling?
No — that's the worst time to stop. A falling market means your same monthly amount buys more units. Investors who pause during corrections lock in the loss and miss the recovery. If you can only do one thing right with a SIP, it's: don't stop.
Is step-up SIP worth the effort?
Yes, and it's not extra effort. A 10% annual step-up roughly doubles your final corpus over 20 years versus a flat SIP. Most fund houses let you set it once and forget it. Match it to your annual salary bump and you'll barely notice the difference month-to-month.
When does LTCG tax actually kick in?
For equity funds, you owe LTCG only when you redeem (sell) units held over a year, and only on gains above ₹1.25 Lakh in that financial year. The rate is 12.5%. Under that threshold, you pay nothing. While the SIP is running, no tax — just unrealised gains.
Can I stop or pause my SIP without penalty?
Yes for most open-ended funds. ELSS has a 3-year lock-in per instalment. Some funds charge an exit load (usually 1%) if you redeem within a year. Stopping the SIP itself doesn't cost anything — but redeeming the units might.
How much should I start with?
Whatever you can sustain without skipping. ₹500–2,000 is fine to build the habit. The amount you keep going matters more than the amount you start with. Step it up as your income grows.
Does this calculator save my data?
No. All calculations happen entirely inside your browser using JavaScript. Nothing is sent to any server. We do not track, log, or store any of the figures you enter.