How returns change your monthly SIP
When you invest through a Systematic Investment Plan (SIP) in mutual funds, the monthly contribution required to reach a goal depends heavily on the annual rate of return. Small changes in that rate can make a big difference over long periods because of compounding.
Two clear examples for a ₹1 crore target in 15 years
- If your portfolio averages 12% per year: you would need roughly ₹20,016 per month to accumulate ₹1 crore in 15 years.
- If your portfolio averages 9% per year: the monthly SIP rises to about ₹26,426 for the same 15-year goal.
Why the gap matters
The extra ₹6,410 per month (the difference between the two SIPs) exists because higher returns accelerate growth through compounding. Over many years, each percentage point of additional annual return reduces the burden on your monthly savings substantially.
Simple rules to reduce risk and improve outcomes
- Start early: Time in the market beats timing the market. The earlier you begin, the lower your monthly SIP for the same target.
- Increase SIPs over time: If returns fall short or income grows, raise contributions rather than changing goals.
- Diversify: Mix equity, debt and hybrid funds to match your risk tolerance and time horizon.
- Review periodically: Rebalance and reassess goals annually to stay on track.
- Keep inflation and taxes in mind: Nominal returns need to outpace inflation to increase real wealth.
Takeaway
Small differences in average returns matter a lot over 15 years. Knowing how rates affect required SIPs helps set realistic targets and makes it easier to plan increases, diversification and periodic reviews to reach that ₹1 crore goal.