How Much Monthly Should You Invest in SIP in Order to Achieve Your Target?
It’s simple to set financial goals, but achieving it needs a well-defined plan and ongoing discipline. Systematic Investment Plans or SIPs are one of the easiest and best methods to attain your financial aspirations. Whether purchasing a home, investing in your child’s education, or creating a retirement corpus, SIPs can help you achieve your goal using the benefit of compounding.
But the most frequently asked question every investor has is:
“How much should I invest every month in SIP to achieve my target?”
Let’s discover.
What Is SIP and How Does It Work?
A Systematic Investment Plan (SIP) helps you invest a predetermined amount periodically into a mutual fund scheme — monthly, for example. This technique helps you practice discipline with your finances, does away with market timing worries, and enables you to gain from rupee cost averaging.
With each SIP installment, you purchase units of the mutual fund. Your investments appreciate over time as:
- You continue to invest monthly, and
- The fund earns returns by compounding.
The magic of SIP is that even small and regular investments can accumulate a huge corpus if you begin early and are regular.
Why Defining Your Financial Goal Is Crucial
Before you decide the amount to invest, you need to decide what you are investing for. Different goals need different time horizons and investment amounts.
Following are a few examples:
| Goal | Time Horizon | Example Amount Needed |
| Emergency Fund | 1–2 years | ₹2–3 lakh |
| Child’s Education | 10–15 years | ₹20 lakh |
| Buying a Home | 8–10 years | ₹30–40 lakh |
| Retirement Corpus | 25–30 years | ₹1 crore+ |
When you know your target amount and time period, it is easy to calculate your ideal SIP.
Formula to Calculate SIP Amount
To calculate how much you should invest each month, you can use this formula or any SIP calculator:
P= (F×r/12)/(((1+r/12)^12n)−1)
Where:
P = Monthly SIP amount
F = Future value or goal amount (in ₹)
r = Expected annual return (in decimal, e.g., 12% = 0.12)
n = Investment period in years
Example 1: Goal of ₹10 lakh in 10 years
Assume:
.Expected return = 12% per annum
.Time = 10 years
Using the formula (or SIP calculator),
Your. needed SIP = ₹4,300 every month (approx).
So, by investing ₹4,300 every month for 10 years at 12% per annum return, you’ll end up with ₹10 lakh.
Example 2: Saving ₹50 lakh in 20 years
Let’s assume:
. Expected return = 12%
. Time = 20 years
Your. needed SIP = ₹6,900 every month (approx).
That’s the magic of long-term investing — the longer you stick around, the smaller you’ll need to invest. every month.
Factors That Influence Monthly SIP Amount
1. Target Amount
The more ambitious your goal (such as a home or retirement), the greater the monthly SIP you’ll require.
2. Time Horizon
The sooner you start, the greater advantage you get from compounding and hence the smaller SIP can result in huge goals.
Illustration: ₹5,000/month for 25 years at 12% turns into almost ₹75 lakh!
3. Desired Rate of Return
Equity funds tend to provide better returns (10–14% long-term), whereas debt funds provide lower (6–8%).
Selecting the appropriate category affects your needed SIP amount.
4. Inflation
Always factor in inflation. For long-term objectives, raise your target by 5–6% every year to keep future buying power intact.
5. Step-Up SIP
You can raise your SIP annually (let’s say 10%) as your salary increases. This will make you attain your goal sooner without the pinch.
Step-by-Step: How to Decide Your SIP Amount
Step 1: Identify Your Goal
Specify it clearly — e.g., “I want ₹25 lakh for my daughter’s education in 15 years.”
Step 2: Estimate Inflation-Adjusted Goal
At 6% inflation, today’s ₹25 lakh will be ₹60 lakh in 15 years.
Step 3: Select an Assumed Return
If you are going to invest in an equity fund, assume 12%.
Step 4: Calculate Monthly SIP
Use an SIP calculator (such as SmartMFSip’s SIP Calculator).
For ₹60 lakh target in 15 years at 12% rate of return → Required SIP ≈ ₹14,000/month.
Step 5: Begin and Persist
Begin your SIP now — waiting even for one year can make a large impact.
Also, review your SIP annually.
Step-Up SIP: Increase Your Investment With Income
A Step-Up SIP increases your monthly investment by a predetermined percentage annually automatically.
Example:
Begin with ₹5,000/month and rise by 10% per year.
In 10 years, you’ll be putting in ₹11,800/month, and your overall wealth will grow much faster.
Advantages:
- Matches your increasing income
- Creates larger wealth with smaller initial sums
- Keeps up with inflation
SIP Planning Table (Example)
| Goal | Duration | Return | Target Corpus | Required SIP |
| Buy a Car | 5 years | 10% | ₹10 lakh | ₹13,000 |
| Child’s Education | 15 years | 12% | ₹30 lakh | ₹6,900 |
| Retirement | 25 years | 12% | ₹1 crore | ₹7,500 |
| Dream House | 20 years | 11% | ₹60 lakh | ₹8,200 |
(Approximate figures — actual returns may differ.)
Common Mistakes to Avoid While Planning SIP Amount
- Beginning Late: The sooner you begin, the lower your required SIP.
- Ignoring Inflation: Always make inflation adjustment in your target.
- Halting SIP During Market Decline: Volatility is natural; remain disciplined.
- Not Checking Portfolio: Check annually to keep your money aligned with your objectives.
- Selecting Incorrect Funds: Select funds based on your goal’s horizon and risk tolerance.
The Power of Compounding – Why Early Start Matters
Compounding refers to the increase of your investment on both the principal and interest earned.
Example:
- ₹5,000/month for 10 years @12% = ₹11.6 lakh
- ₹5,000/month for 25 years @12% = ₹75 lakh
That’s 6.5x more wealth — just by keeping the momentum going longer.
So, the ideal time to open an SIP was yesterday. The next best time is now.
Last Things
The ideal SIP amount is based on your goal, time horizon, and expected return.
Begin with what you can, even if it’s little, and step up gradually with a step-up plan.
Keep in mind:
“SIP is not timing the market — it’s time in the market.”
Then, use a Goal SIP Calculator, invest wisely month after month, and watch compounding do its magic.
Planning your SIP already?
Use our SIP Calculator
to determine the precise amount you must invest to achieve your goals today.