SIP Returns: The Smart Way to Invest For Beginners

Do you also have a question in your mind that if we do SIP in mutual funds, then how much interest will we get every month or every year? This question is about every new investor that when we invest our money in SIP, how much return will we get on it monthly or yearly.

If you also want to know how much return is received on investing how much money in SIP and in how much time, that means what is the monthly or annual interest rate in SIP, is it fixed or keeps changing and in which SIP does one get the highest return? To know about this, please read this post till the end.

How much return do you get in SIP?

SIP gives an average return of 12% to 15% per annum. This is the interest on your money for 1 year. But the interest rate in SIP is not fixed, meaning that if you invest in SIP through SIP, you get a higher return (20-30%) while in some you get a lower return (8-10%).

But how much return you will get in SIP depends on the performance of your mutual fund and the mutual fund rises or falls only when there is volatility in the stock market.

• When the market booms, the returns of most SIPs also start increasing

• and when the market falls, the SIP returns also start decreasing.

This happens because most mutual fund investors have invested their money in the shares of big companies of Nifty 50, which keep rising or falling with the ups and downs of the stock market.

Many times it happens that due to some kind of big crisis in the global markets (like Russia Ukraine war, increase in interest rates of banks, banking crash) there is a sudden recession in the market and due to this the returns of SIP investors also start decreasing.

So if you have invested in SIP for only 6 months or 1 year, then your returns can also decrease in the short term.

But if you are a long term SIP investor, then this type of short term crisis will not affect you because after a time organic growth will start in the market and then the returns of SIP in the market start increasing twice as fast.

It means that if you do SIP for a long period (5 years, 10 years or more) then you get returns at an average annual CAGR rate of 12% to 15% through compoundin

How much money should be invested in SIP to get more than 12% return?

Now this question will definitely come in your mind that how much money should be invested in SIP so that we can get more than 12% returns annually. So the answer to this is that it is not a fixed amount, meaning it is up to you how much money you want to invest.

If you want, you can start SIP with just Rs 1000 every month. To invest in SIP, you have to find a good mutual fund and then link your bank account to it so that your money gets deducted from your bank account every month and invested in SIP.

But keep in mind that before doing SIP in any mutual fund, you must check its past performance. Because there are some funds that invest your money in such companies whose returns are not that good.

If you are a beginner, then I suggest you to do SIP in large cap mutual fund. In large cap mutual fund, your money is invested in the top companies of India and along with their growth, your money also keeps growing with time.

Is the interest rate fixed in SIP?

No, the annual interest rate i.e. returns are not fixed in SIP but this does not mean that your SIP investment is bad. Rather SIP investment is considered to be the best investment for long term investors.

You should understand that in a bank savings account you get 3-4% interest in 1 year and even if you make FD, you get maximum interest of 7-8% but in SIP you easily get 12% return.

It is true that if you have invested money in SIP for short term then due to fluctuations in the market your returns may be slightly less but if you have invested in SIP for a long time (5 years or more) then it is certain that you will get more returns in it than all other investments.

How much return do you get from compounding in SIP?

When it comes to SIP investment, you definitely hear the name of compounding, but do you know how compounding works on your money?

If I explain in short, the interest you get on your interest is compounding.

For example-

If you invest Rs 10000 in SIP, you get Rs 1200 interest at the rate of 12% per annum. That means now your money has increased to Rs 10000+1200 = Rs 11200.

Now the return you will get in the second year will not be on Rs 10000 but on Rs 11200, which is Rs 1344 at the rate of 12%, that is, in the second year the money will increase to Rs 11200+1344 = Rs 12544

Now in the third year you will get 12% interest on Rs 12544 which is Rs 1505, meaning after 3 years your investment will increase to Rs 12544+1505 = Rs 14049.

In this way, in 20 years your Rs 10000 will increase to Rs 96463, meaning you would have got interest of Rs 86463 without doing anything.

This was just an example of how your returns keep increasing through compounding if you invest Rs 10000 once and leave it.

But in SIP you invest money monthly instead of lumpsum, which is why you get even more benefit of compounding, this happens because your money keeps getting invested in every type of market condition. To understand this in a better way, let us now know that-

How do you calculate SIP returns?

According to the SIP return calculator- If you do an SIP of just Rs 5000 per month for 5 years continuously and you get a return at the rate of 12% CAGR, then after 5 years you will have a total money = Rs 4.12 lakh

If you do this SIP for 10 years, then after 10 years you will have Rs 11.62 lakh

After 20 years you will have Rs 11.62 lakh 75.8 lakh (and in 20 years your total investment will be only Rs 12 lakh 63.8 lakh interest)

And after 30 years your money will increase to: Rs 1 crore 76 lakh (while at the rate of Rs 5000 monthly till now your total investment would be only Rs 18 lakh)

If you get a 15% annual return instead of 12%, then this money will be instead of 1.76 crore in 30 years – Rs 3.5 crore

This means that the longer the period for which you invest in SIP, the faster your money will grow.

This means that by doing SIP of just Rs 5000 per month, you can become the owner of wealth worth Rs 3.5 crore in 30 years.

Yes, this is the power of compounding.

Facts (How much interest is received in SIP)

How much return do you get in SIP in 1 year?

If you invest for a long period, you get an average return of 12% in SIP in 1 year.

How much will I get if I invest Rs 5000 per month in SIP?

If you invest only Rs 5000 per month in SIP for 25 years, then your total investment will be Rs 15 lakh and after 25 years you will get a total return of Rs 1.49 crore, which means the total value of your money will be: Rs 15 lakh + Rs 1.49 crore = Rs 1.64 crore

Know => How much tax is applicable on SIP? Is SIP tax-free?

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