SIP Calculator

A systematic investment plan is an instruction to invest a fixed amount at a fixed interval — almost always monthly — into a chosen fund, rather than deciding each time whether the moment looks right. The money is collected automatically on a set date and buys however many units that amount is worth at that day's price. Nothing about the mechanism is exotic: it is a standing order pointed at a fund instead of a savings account.

What the schedule buys is not a better return but the removal of a decision. The single largest destroyer of real-world investor returns is not fee drag or fund selection — it is the pattern of buying after a rally and selling after a fall. A SIP does not improve on a perfectly timed lump sum, and research consistently finds that lump-sum investing wins more often than not simply because markets rise more often than they fall. What it does is make the far more common failure — not investing at all, or investing erratically — much harder to commit.

Because the instalment is a fixed amount of money rather than a fixed number of units, a falling price automatically buys more units and a rising price buys fewer. Over a full cycle this pulls the average cost per unit below the average price per unit — an arithmetic consequence of the fixed-amount rule, not a forecasting skill. This is what "rupee-cost averaging" (or dollar-cost averaging) names.

It is worth being precise about the limits of that effect, because it is frequently oversold. Averaging reduces the consequence of investing everything at a single bad price; it does not protect against a market that falls and stays down, and it does not turn a poor fund into a good one. In a market that rises steadily from the day you start, averaging costs you money relative to having invested the whole sum on day one. The honest case for a SIP is behavioural and cash-flow-driven — most people are paid monthly and can only invest monthly — rather than a claim of superior returns.

A flat instalment quietly shrinks in real terms every year that inflation runs above zero, and it also falls further behind an income that is rising. A step-up — sometimes called a top-up — raises the instalment on each anniversary, typically by a percentage chosen to track expected salary growth.

The effect is larger than most people expect, for two compounding reasons at once.

Every projection here is only as good as the return figure entered, and this is where most SIP planning goes wrong. A number is chosen because it produces a satisfying final figure rather than because there is any evidence behind it.

A defensible approach is to start from the long-run record of the asset class rather than from a recent stretch of performance. Broad equity markets have historically produced high-single-digit to low-double-digit nominal annual returns over multi-decade periods, with severe multi-year drawdowns inside that average. Debt and money-market funds sit far lower. A blended portfolio sits between them in rough proportion to its equity share. Whatever figure is used, it should be understood as the midpoint of a very wide distribution: the same plan run through a real sequence of market years produces a range of outcomes, not the single smooth curve any calculator draws.