It is pretty straightforward to start an SIP (Systematic Investment Plan), but it is your commitment that really makes a fortune. A lot of experts broadly agree that you will get the best outcome from your SIP only if you allow it to mature. No matter whether the market is up or down, the real strength of an SIP is only to be found with long-term investments, i.e. usually 10 years or more.
Why time matters in SIP investing?
An SIP is a program where one can invest a fixed sum every month without worrying about market timing. Sometimes you purchase the units at a high price, and other times at a low price. Over time this has the effect of averaging out the cost of your investment (which in India is called “Rupee Cost Averaging”). But this benefit is fully visible only when you continue your SIP for several years.
If you limit your investment to 1–3 years, your returns will be mainly market-dependent. You may have a year with very high profits, followed by another with very low returns. However, if you invest for 7–10 years, the market fluctuations even out and the growth of your investment becomes more stable.
What experts say According to Jiral Mehta, Senior?
According to Jiral Mehta, Senior Manager – Research at FundsIndia, IPs of at least seven years greatly reduce the chance of losses. Their 20 years of data shows that there have been no instances of negative returns in the case of SIPs that were maintained for 7 years or more.
Moreover, close to 81% of these SIPs provided annual returns of over 10%.
She also clarifies that if there is a market decline towards the end of your SIP tenure, simply continuing the investment for one or two more years usually results in a strong bounce-back. This underlines the fact that holding on to your investment and keeping up your discipline over the long term is what really leads to wealth creation.
Short-term vs long-term results
Results of short SIPS may not be significant, but the difference becomes evident when you extend your investment.
For instance:
- A ₹5,000 SIP can be worth approximately ₹2.25 lakh in 3 years if the annual growth is 15%.
- After 5 years, it will be about ₹4.37 lakh.
- A ₹10,000 SIP will be around ₹7.16 lakh in 7 years.
- However, the same SIP increases to nearly ₹13.15 lakh in 10 years.
This demonstrates that most of the leap in returns takes place in the last few years because that is when compounding gets stronger.
Why many investors stop early?
There are some investors who cease their SIPs when markets are dull or even falling. But the first few years are only the foundation. Usually, turning point for the real growth is after the eighth year when you see your cumulative investment earning interest on the already earned interest.
Is 10 years enough?
Yes, 10 years is a good point to start from, but if your goals include retirement, children’s education, or buying a house, then the best thing to do would be to keep your SIP going for 15–20 years. Longer periods not only help ride out the ups and downs of the market but also grant more peace of mind.
Key takeaways
- SIPs below 3 years are affected by market timing.
- 5–7 years offer basic compounding.
- 10–15 years help create real wealth.
- 20+ years can lead to financial freedom.
In simple terms, the longer you stay invested, the better your chances of building meaningful wealth.
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