SIP Calculator: ₹500, ₹1,000, or ₹5,000... With what amount should you start an SIP? Learn the simple formula..

SIP Calculator: Most people starting to invest in mutual funds have one common question: With what amount should one start an SIP? ₹500, ₹1,000, ₹5,000, or even more?

There is no single answer to this. The right SIP is one that you can sustain consistently every month over the long term. In the world of investing, regularity is more important than starting with a large sum. It is this habit that can build substantial wealth over time.

You can start with an SIP of just ₹500

Today, most mutual funds allow you to start an SIP with as little as ₹500 per month. If you are investing for the first time or have just started your career, beginning with a small amount can be a wise decision.

Suppose you start an SIP of ₹500 per month at the age of 25. If you earn an average annual return of 12% and continue investing for 35 years, you will accumulate a corpus of ₹32 lakh. Your total investment would be only ₹2.10 lakh, meaning you would gain a profit of approximately ₹30 lakh.

What difference does an SIP of ₹1,000 or ₹5,000 make?

Now, let’s assume an investment tenure of 25 years and an average annual return of 12%.

Monthly SIP    Total Investment    Estimated Corpus
₹500    ₹1.50 lakh    ₹9.5 lakh
₹1,000    ₹3 lakh    ₹19 lakh
₹5,000    ₹15 lakh    ₹95 lakh
This is the power of compounding. The larger the SIP amount and the longer the tenure, the greater the potential to build a substantial corpus.

What exactly is compounding?

Suppose you start an SIP of ₹5,000. You earn a return in the first year. In the following year, you earn returns not only on your original investment but also on the profit earned in the first year. This is what is known as compounding.

In other words, your money starts earning money itself. That is why time is considered the greatest asset in investing. Should you stop your SIP if the market falls?

That is the biggest mistake one can make. When the market drops, your SIP allows you to purchase more units. Later, when the market recovers, these same units can generate better returns.

For example, suppose the NAV was ₹100 in the first month; an investment of ₹5,000 would fetch you 50 units. The following month, if the market falls and the NAV drops to ₹80, that same ₹5,000 investment would get you 62.5 units. Essentially, even when the market is down, your investment is acquiring more units for you. Therefore, a market decline does not always result in a loss.

Increase your SIP when your salary rises.

If your salary increases annually, you should also increase your SIP contribution. This is known as a 'Step-Up SIP.' Let’s assume you start an SIP of ₹5,000 per month. If you do not increase the amount over 25 years, the fund could grow to approximately ₹95 lakh, assuming an annual return of 12%.

However, if you increase your SIP contribution by just 10% each year, that same fund could grow to nearly ₹2 crore. In other words, simply by making a habit of increasing your SIP, you could more than double your final corpus.

What is the right SIP amount for you?

There is a simple rule for this. If your monthly income is ₹40,000, aim to invest at least 10%—that is, ₹4,000. If that isn't feasible right now, start with ₹500 or ₹1,000. The most important thing is to get started. You can always increase your SIP contribution later as your income grows.

5 things to remember before you start investing

Start with an SIP amount that you can comfortably sustain.
Maintain a long-term horizon of at least 10–15 years.
Do not stop your SIP when the market falls.
Increase your SIP contribution by 10–15% annually.
Invest with a specific goal in mind, rather than focusing solely on returns.