SIP, lumpsum and the returns nobody actually gets
Every SIP calculator assumes a return that no fund delivers. Understanding what that assumption hides is more useful than the number it produces.
A SIP calculator will tell you that ₹5,000 a month at 12% becomes about ₹11.6 lakh in ten years. That figure is arithmetically correct and quietly misleading, and it is worth understanding why before you plan around it.
The assumption underneath
It assumes 12% every single month, for a hundred and twenty months. No equity fund behaves that way. The real path swings widely either side, and the order in which those swings arrive changes the outcome — particularly near the end, when the corpus is largest and a bad year costs the most in absolute terms.
Use the SIP Calculator as a planning aid, not a forecast. Then run it again at 9% and see whether your plan still works. If it only works at 12%, it is not a plan.
Where step-up genuinely helps
A flat SIP loses ground to inflation and to your own rising income. Raising the instalment even 5% a year lifts the final corpus considerably, because the later instalments still get years to compound. This is one of the few levers that is entirely within your control — unlike the return.
SIP or lumpsum?
A lumpsum wins if markets rise steadily from your entry point, and loses badly if they fall right after. A SIP spreads the entry price, which reduces timing risk — it does not reduce market risk, and anyone who tells you it does is selling something. Compare with the Lumpsum Calculator, which also shows the inflation-adjusted value.
The number that actually matters
Not the corpus. What the corpus will buy. ₹1 crore in twenty years at 6% inflation has roughly the purchasing power of ₹31 lakh today. Real return is what is left after inflation, and if it is negative the investment loses ground however good the nominal figure looks.
What the calculators leave out
- Expense ratios, deducted before the return you see.
- Exit loads on early redemption.
- Tax — equity gains above ₹1.25 lakh a year are taxed at 12.5% after a year of holding.
Compare against the safe alternatives
Before assuming equity, price the certain options. PPF is exempt at all three stages and hard to beat for its risk level. Fixed deposits are fully taxable at slab rate, which changes the comparison more than most people expect.