Systematic Investment Plans (SIPs) have become the go-to method for Indians to build wealth with discipline. But many investors still wonder—how much will my SIP grow, what will be my real returns after inflation and tax, and how long will it take to reach my goal?
This article breaks down how SIP growth is calculated, how to adjust for inflation, and how to map your investments to real-life goals.
How SIP Growth Works
An SIP is just a recurring investment—₹5,000 per month, for example—into mutual funds. Over time, the money compounds.
- Monthly Investment (P) – Your SIP amount.
- Expected Return (r) – Average annual return of the fund (e.g., 12% for equity).
- Time Period (n) – Total number of months you invest.
Formula (future value of SIP):
FV = P × [(1 + r/n)^nt – 1] × (1 + r/n) ÷ (r/n)
Example: ₹5,000/month SIP for 10 years at 12% = ~₹11.6 lakh invested, ~₹11.1 lakh gain → Total ₹22.7 lakh.
Real Returns: Adjusting for Inflation & Tax
Your SIP statement may show 12% CAGR, but real returns are lower once you factor:
- Inflation – If inflation averages 6%, a 12% return is effectively 6% real growth.
- Tax –
- Equity SIP (held >1 yr): 10% LTCG above ₹1 lakh.
- Debt SIP: Taxed at slab rate.
So if your SIP gave 12% but inflation was 6% and you paid ~1% in tax, your real return = ~5%.
Mapping SIPs to Goals
You don’t invest in SIPs just for numbers—you invest for goals.
- Child Education (₹30 lakh in 15 yrs) → Needs ~₹10,000/month SIP at 12% return.
- House Down Payment (₹20 lakh in 10 yrs) → Needs ~₹12,000/month SIP.
- Retirement (₹2 crore in 25 yrs) → Needs ~₹15,000–₹20,000/month SIP depending on inflation assumptions.
| Goal | Target Amount | Time | Monthly SIP (12% return) |
|---|---|---|---|
| Child Education | ₹30 lakh | 15 years | ₹10,000 |
| House Down Payment | ₹20 lakh | 10 years | ₹12,000 |
| Retirement Corpus | ₹2 crore | 25 years | ₹15,000–₹20,000 |
Using SIP Calculators
Instead of doing math manually, SIP calculators instantly show:
- Future value of your SIP
- Total invested vs gains
- Impact of different return rates
- Goal timelines
SIPs are simple, but real wealth-building needs clarity on returns, inflation, tax, and timelines. Once you know your real return, you can plan for goals without guesswork.
For new investors, starting with just ₹1,000/month and gradually increasing is the best strategy.
Most investors either overestimate SIP returns or underestimate how inflation eats into them. A ₹1 crore target may not be enough 20 years later. By calculating growth, real returns, and timelines today, you invest smarter for tomorrow.
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