Using the Dhan SIP Calculator is quick and straightforward. It only takes a few inputs to estimate the future value of your mutual fund investments:

Tip: You can experiment with different numbers. For example, check how investing for 5 years vs. 15 years changes your corpus, or compare the effect of 8% returns vs. 12% returns. This gives you a clear idea of how time and returns impact wealth creation.

With Dhan’s SIP Calculator, you also get added flexibility:

This makes planning your investments easier, more accurate, and aligned with your long-term financial goals.

SIP is a systematic investment plan that allows investors to invest a fixed amount of money at regular intervals(weekly, monthly, quarterly, etc.) into a mutual fund scheme. This auto-invest approach takes a set amount and has it automatically withdrawn from your bank account at selected intervals and invested in your chosen fund without the need for manual intervention.

SIPs are popular among investors because they do not require a large lump sum to get started, making investing in the stock market more accessible for everyone. They help to develop a disciplined habit of saving and, over time, investing through market ups and downs.

SIPs average out the buying cost, thereby reducing the impact of volatility over time on investment. For beginners and experienced investors, SIPs provide a gradual, slow, and practical path towards long-term wealth creation.

When you invest through a Systematic Investment Plan, a fixed amount is deducted from your bank account at regular intervals and invested in your chosen mutual fund. Each contribution buys you a certain number of units of the fund, depending on its Net Asset Value (NAV) on that day.

If the NAV is lower, your fixed contribution buys more units; if the NAV is higher, you get fewer units. Over time, this process averages out your purchase price, a principle known as rupee-cost averaging. It helps smooth out the effects of market ups and downs, ensuring you don’t need to worry about “timing the market.”

By investing consistently through both bull and bear phases, SIPs allow you to benefit from long-term wealth creation, without the stress of predicting market movements. The combination of rupee-cost averaging and compounding makes SIPs one of the most effective ways to build wealth steadily.

Let’s understand how an SIP grows with the help of an example.

Consider an investor, Mr. A, who wants to invest ₹5,000 per month for 10 years through SIP at an annual return of 10% on his investment. At the end of 10 years, how much wealth will he accumulate with the help of SIP?

To calculate the Future Value of SIP, we use the following formula:

[ FV = P * {(1 + r)^n - 1} / {r} * (1 + r) ]

Where:

Plugging the values into the formula:

FV = 5,000 * {(1 + 0.00833)^120 - 1} / {0.00833} * (1 + 0.00833)

After 10 years, Mr. A’s SIP corpus will be around ₹10.3 lakh. Out of this, he has invested ₹6 lakh (₹5,000 x 120), and the remaining ₹4.3 lakh is all compounding. So, through compounding and disciplined investing, small regular investments over time can create substantial wealth.

SIPs are now one of the most popular methods of investing in mutual funds, not only among beginners but also among experienced investors. The key benefits of investing through SIP are as follows:

The SIP Investing is a time-tested and successful strategy of accumulating wealth. However, there are certain pitfalls to avoid in order to maximize the returns and prevent failures:

By being mindful of these mistakes, you can enhance the effectiveness of your SIP investment journey and pursue your financial goals with confidence and discipline.

Choosing between a Step-Up SIP, a lump-sum investment, or a Systematic Investment Plan (SIP) can have a big impact on how much wealth you build over a period of time. Below are three tables showing the difference in investment approach of all these investment plans by taking an example of an investor with a 10-year investment horizon at an assumed annual growth of 15% CAGR.

To sum it up, all three approaches have their advantages, but regular SIPs are best suited for consistent investors, lump-sum best suits investors with surplus capital, and Step-Up SIP best suits investors who have high long-term targets.

Please note: The above returns are approximate estimates. Actual returns may vary depending on the category selected, the schemes chosen, and prevailing market conditions.

With goal-based SIPs, you can align your investments with your financial objectives, whether it is retirement, buying a new house, or the education of your child. Setting a goal will allow you to choose the required SIP amount, type of fund, and period to invest that fit your goal, time frame, and risk tolerance, and consequently make your investment more goal-oriented and focused.

To do this accurately, details regarding how much you need to invest to accomplish your goal can be estimated by using the Dhan SIP Goal Calculator, helping you stay on track with your investment objective.

Starting your SIP early can make a drastic difference to your wealth creation, due to the power of compounding and time in the market.

For example, consider a monthly SIP of ₹5,000 at a 15% CAGR:

This clearly shows that the earlier you start, the more time your investments have to grow and recover from market downturns. Even small SIPs can accumulate into significant wealth over the long term. As the common investing wisdom goes: “The best time to start was yesterday; the second best is today.” Starting now gives you a head start toward your financial goals, making each month of investment count.

Starting a SIP is more than just selecting a mutual fund and setting an amount; it’s about aligning your investments with your financial goals and risk profile. Here are things to keep in mind when starting a SIP:

Dhan’s SIP Goal Calculator can help you align these considerations with your target amounts, investment horizon, and risk levels, and make your SIP journey both structured and goal-oriented.

Systematic Investment Plans (SIPs) carry the same market risks as the mutual funds in which they invest. Your investment value will fluctuate based on market performance, reflecting the ups and downs of the underlying securities. However, since SIPs involve investing a fixed amount regularly over time, they reduce the impact of short-term volatility as compared to investing a large lump sum at once.

This gradual investment approach helps in averaging your purchase cost (rupee-cost averaging) and mitigates the market risks. It’s important to choose mutual funds as per your risk appetite and have a long-term investment horizon to ride out market fluctuations. Also, diversification across different funds and asset classes can further mitigate risk and reduce portfolio volatility.

At Dhan, we believe in transparency. Since SIPs are not guaranteed or risk-free investments, we communicate every step clearly to our investors, keeping them updated on the risks and market conditions.

By staying invested and reviewing your portfolio periodically, SIPs can be a relatively safer way to reach your financial goals while navigating market uncertainties.

The table below will help you understand how SIP investments are taxed based on fund type, aiding better financial and tax planning.

Note: The exact “long-term vs short-term” periods for debt and hybrid can depend on when the fund was purchased (pre- or post-April 1, 2023), and whether older rules apply.

SIPs are a simple and convenient way to invest in mutual funds over the long term. They help you invest regularly without the stress of timing the market and build wealth steadily through disciplined investments and dollar-cost averaging.

Using a SIP calculator helps you set realistic expectations and plan better. It gives you a clear preview of the returns based on your monthly investment, expected rate of return, and investment duration, which is useful for planning your investment journey.

Now that you know how SIPs work and have calculated your returns, you are ready to make an informed decision. Remember, a small step today can lead to a big financial outcome in the future. Start your SIP journey with confidence. Happy investing!