A Systematic Investment Plan (SIP) of ₹5,000 per month sounds modest — it is less than what many people spend on eating out. But over 10 years, you invest a total of ₹6,00,000 (₹6 lakh). The magic of compounding turns this into something much larger.
At an expected return of 12% per annum (the long-term average for diversified equity mutual funds in India), your ₹6 lakh grows to approximately ₹11.62 lakh. That is nearly double your investment — ₹5.62 lakh in pure gains, all earned by letting your money work for you month after month.
The key principle is that each SIP instalment earns returns that are reinvested, which in turn earn more returns. The earlier instalments compound for longer, doing the heavy lifting. This is why starting early matters more than investing large amounts later.