A ₹10,000 monthly SIP for ten years puts ₹12,00,000 of your own money in. At a 12% annual return it comes out as ₹23,23,391 — so ₹11,23,391 of it was never yours to begin with.
That gap is the entire argument for starting early, and it grows faster than most people expect. Here is the arithmetic, and an honest answer to the question that always follows: would investing it all at once have done better?
The formula, in plain English
Each instalment is a separate investment that compounds for however long it has left. The first ₹10,000 gets the full term; the last one gets a single month. Add up all of them and you get the standard future-value-of-an-annuity expression:
FV = P × [ (1 + r)^n − 1 ] / r × (1 + r)
P = monthly instalment
r = annual rate ÷ 12 (12% p.a. → 0.01)
n = number of instalments
The trailing (1 + r) is there because SIP instalments are paid at the
start of each month, so every one of them earns an extra month of growth. Leave it
out and you understate a 20-year SIP by roughly one month's return — small, but it is the
difference between matching your fund statement and not.
What a monthly SIP becomes at 12%
| Monthly | 5 years | 10 years | 15 years | 20 years |
|---|---|---|---|---|
| ₹5,000 | ₹4.12 L | ₹11.62 L | ₹25.23 L | ₹49.96 L |
| ₹10,000 | ₹8.25 L | ₹23.23 L | ₹50.46 L | ₹99.91 L |
| ₹25,000 | ₹20.62 L | ₹58.08 L | ₹1.26 Cr | ₹2.50 Cr |
Notice the shape: doubling the years does far more than doubling the money. ₹10,000 a month for 10 years gives ₹23.23 L; for 20 years it gives ₹99.91 L — not double, but roughly 4.3×. The second decade does most of the work, which is why the cost of delaying is so much higher than it looks.
The same ₹10,000, at different returns
| Annual return | 5 years | 10 years | 15 years | 20 years |
|---|---|---|---|---|
| 10% | ₹7.81 L | ₹20.66 L | ₹41.79 L | ₹76.57 L |
| 12% | ₹8.25 L | ₹23.23 L | ₹50.46 L | ₹99.91 L |
| 15% | ₹8.97 L | ₹27.87 L | ₹67.69 L | ₹1.52 Cr |
Three percentage points between 12% and 15% look minor over five years and enormous over twenty — ₹51.68 L of difference on the same ₹24,00,000 invested. This is also why fund expense ratios matter far more than they appear to: they come straight off that rate.
SIP vs lump sum, honestly
Compare like with like: the same total money, either drip-fed monthly or invested in full on day one.
| Term | Total invested | As a SIP | As a lump sum on day one | Difference |
|---|---|---|---|---|
| 5 years | ₹6.00 L | ₹8.25 L | ₹10.90 L | +₹2.65 L |
| 10 years | ₹12.00 L | ₹23.23 L | ₹39.60 L | +₹16.37 L |
| 15 years | ₹18.00 L | ₹50.46 L | ₹1.08 Cr | +₹57.47 L |
| 20 years | ₹24.00 L | ₹99.91 L | ₹2.61 Cr | +₹1.62 Cr |
The lump sum wins every row, and it is not close — ₹1.62 Cr over twenty years. That is not a surprise or a trick: money invested on day one compounds for the full term, while your last SIP instalment compounds for one month. At a constant positive return, earlier always beats later.
So why does everyone recommend SIPs? Because the comparison above assumes you already have ₹24.00 L sitting in cash. Almost nobody does — the real choice is a SIP or nothing, and a SIP is what turns a salary into an investment.
It also assumes a constant return. Real markets are not constant, and buying at a fixed monthly rhythm means buying more units when prices are low. That does not beat a lump sum on average, but it removes the risk of putting everything in the week before a fall — a risk people handle badly in practice.
What these numbers are not
Every figure above is arithmetic on an assumed constant return. Equity funds do not deliver 12% a year; they deliver something wild that has historically averaged near it over long periods. Your actual outcome depends on the sequence of returns, the fund's expense ratio, and capital gains tax on exit — none of which is modelled here.
Treat the tables as showing the shape of compounding, not a prediction of your balance.
Run your own numbers
The SIP calculator takes any instalment, rate and term, and charts the invested-versus-gains split year by year, so you can see the point where returns overtake contributions. For a one-off investment instead of a monthly one, the compound interest calculator is the right tool.
Not sure how much you can commit each month? Start from what actually reaches your account — the guide on CTC versus in-hand salary works that out line by line.