Rs 10,000 SIP can create Rs 87.3 lakh in 20 years. Why this projection may not match your actual outcome

SIP calculators often make long-term investing look straightforward like investing a fixed amount every month, staying invested for a long period, say two decades, and let compounding do the rest. But investors may find it difficult to replicate such projections in real life because their income, affordability and financial needs change over time.

According to a report by DSP Mutual Fund, a Rs 10,000 monthly SIP maintained for 20 years would have generated a terminal corpus of Rs 87.3 lakh, based on the Nifty 50 TRI for the period from September 2006 to August 2026.

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This calculation assumes nearly 240 monthly installments made and a total investment of Rs 24 lakh. However, when the SIP is adjusted for what an investor could realistically afford based on income, the terminal corpus falls considerably to Rs 31.9 lakh. This points out to the realistic corpus this income adjusted SIP would have generated, and the gap versus the flat Rs 10,000 projection is significant.

The analysis points to an important issue for investors that SIP projections work well in spreadsheets, but actual outcomes depend on affordability and investor behaviour. For this, the fund house said, “SIP works in Excel extrapolations. Real outcomes need discipline & affordability.”

The fund house also highlights that a Rs 10,000 monthly SIP that appears affordable today would have been out of reach for many investors two decades ago.

The analysis uses monthly per-capita net national income (NNI) as a consistent yardstick across time. A Rs 10,000 SIP is roughly 55% of an average Indian's monthly per-capita NNI today, whereas 20 years ago, it represented more than 350% of it.

If the SIP amount is adjusted for income, the amount that could have been invested rises gradually over time — from Rs 1,536 per month in FY2006-07 to Rs 2,595 in FY2010-11, Rs 4,317 in FY2015-16, Rs 5,795 in FY2020-21 and Rs 10,000 in FY2025-26.

In other words, the SIP amount if adjusted for income would have gone up from Rs 1,536 per month in FY2006-07, or 20 years ago, to Rs 10,000 in FY2025-26. This difference has a major impact on the final corpus.

SIP stoppage can hurt long-term wealth

Another risk investors may overlook or is routinely ignored in SIP projections is stopping their SIPs during periods of market stress which can dent the final portfolio value.

The report showed that a 20-year SIP with no stoppage resulted in a final corpus of Rs 87.3 lakh. If the SIP was stopped during different market downturns, the final corpus was lower. The final corpus would have been Rs 77 lakh if the SIP was stopped during the GFC 2008-09 period. The corpus would have been Rs 80.5 lakh if SIP had been stopped during the Euro 2011-12 period.

The final corpus would have been Rs 82.3 lakh if the SIPs were stopped during the taper 2013-14 period and Rs 84.6 lakh during Covid 2020-21.

Stopping an SIP temporarily during a market downturn or at the wrong time can have a lasting impact on the final portfolio value. The other risk is unexpected cash requirements. Withdrawing capital for urgent needs can affect compounding & final portfolio value.

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The fund house illustrated the final corpus if 50% of the corpus was withdrawn at different points in time. A total corpus of Rs 87.3 lakh would have been created with no withdrawal. If the investor withdrew 50% of the corpus at the GFC trough that would have resulted in Rs 75.7 lakh. A 50% withdrawal during the taper 2013-14 period would have resulted in Rs 61.8 lakh, while a 50% withdrawal during the Covid 2020-21 trough would have resulted in Rs 49 lakh.

DSP Mutual Fund mentioned that such periods can also coincide with job uncertainty, layoffs and pay cuts, increasing the possibility that investors may need to stop their SIPs or access their investments precisely when remaining invested matters most.

For investors, affordability, discipline and the ability to remain invested can be as important as the return assumption used in an SIP calculator.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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