Mutual Fund SIP is one of the most popular and trusted investment options for people who want to build wealth slowly with small monthly investments. SIP, which stands for Systematic Investment Plan, allows you to invest a fixed amount every month in a mutual fund. Many investors, especially beginners, prefer SIP because it is affordable, disciplined, and suitable for long-term financial goals.
Mutual Fund SIP
What Is a Mutual Fund SIP?
A Mutual Fund SIP is a method of investing money regularly instead of investing a large amount at once. In SIP, a fixed amount is automatically invested every month in a selected mutual fund scheme. This helps investors develop a habit of saving and investing. SIP also reduces the risk of market volatility because money is invested at different market levels. Over time, SIP benefits from compounding and rupee cost averaging, which can give good returns in the long run.
SIP Investment Details for This Calculation
For this article, we are calculating the return of a ₹1,500 monthly SIP for a period of 48 months, which means 4 years. This calculation is based on an assumed average annual return of 12%, which is commonly expected from a good equity mutual fund over the long term. Please note that mutual fund returns are market-linked and not guaranteed, but 12% is a reasonable estimate used for understanding purposes.
Total Amount Invested in 48 Months
If you invest ₹1,500 every month for 48 months, the total amount invested will be calculated as follows.
₹1,500 × 48 months = ₹72,000
So, over 4 years, your total investment amount will be ₹72,000. This is the amount that goes from your pocket into the mutual fund through SIP.
Expected Returns at 12% Annual Rate
Now let us understand how much return this SIP can generate by 2026. Assuming an average annual return of 12%, your SIP investment benefits from compounding. Based on standard SIP return calculation, a ₹1,500 monthly SIP for 48 months at 12% annual return can grow to approximately ₹93,000 to ₹96,000.
This means your estimated profit will be around ₹21,000 to ₹24,000 over the invested amount of ₹72,000. The exact value may change depending on market performance, but this gives you a clear idea of potential growth.
Year-by-Year Growth Understanding
In the first year, returns may look small because SIP investments are still new and compounding has not fully kicked in. From the second year onwards, returns start growing faster. By the third and fourth year, compounding shows better results because your previous returns also start earning returns. This is why staying invested for a longer time is very important in SIP investments.
Why SIP Is Better Than One-Time Investment for Beginners
SIP is a better option for beginners because it does not require a large lump sum amount. You can start investing with small amounts like ₹500 or ₹1,000. SIP also protects you from market timing risk because investments are spread over time. Even if the market goes down, SIP continues and helps you buy more units at lower prices, which can increase returns in the long run.
Risks Involved in SIP Investment
Although SIP is a smart investment option, it is important to understand that mutual funds are subject to market risks. Returns are not fixed and depend on market performance. Short-term market fluctuations can affect returns, especially in equity mutual funds. That is why SIP is more suitable for long-term goals rather than short-term profit expectations.
Things to Keep in Mind Before Starting SIP
Before starting a SIP, you should select the right mutual fund based on your risk profile and financial goals. Equity funds are suitable for long-term goals, while debt funds are better for low-risk investors. You should also stay consistent and avoid stopping SIP during market downturns. Regular investment and patience are the keys to success in mutual fund SIPs.
A ₹1,500 monthly SIP for 48 months can be a great starting point for building wealth by 2026. With a total investment of ₹72,000, you can expect a value of around ₹95,000 if the fund delivers an average return of 12% annually. Mutual Fund SIP is simple, affordable, and effective for long-term financial planning. If you stay disciplined and invest for a longer period, SIP can help you achieve your financial goals smoothly and confidently.