What a SIP actually does
A Systematic Investment Plan (SIP) invests a fixed amount in a mutual fund on a fixed date each month. Because the amount invested each month is constant but unit prices fluctuate, you automatically buy more units when prices are low and fewer when prices are high — a mechanism called rupee-cost averaging.
The future value formula
FV = P × (((1 + i)ⁿ − 1) / i) × (1 + i)
P is your monthly investment, i is the monthly expected rate of return (annual return ÷ 12 ÷ 100), and n is the total number of months invested. The extra (1+i) factor at the end accounts for the common convention that each month's investment starts compounding from the beginning of that month (an "annuity-due"), matching how most SIP debits work.
Worked example
Investing ₹5,000 a month for 10 years (120 months) at an assumed 12% annual return projects to a future value of about ₹11,61,695 — against a total amount invested of ₹6,00,000, meaning roughly ₹5,61,695 of the total is projected growth.
This is a projection, not a promise: mutual fund returns depend on market performance and will not follow a smooth 12% path in reality — some years will be higher, some lower, and some negative.
Why starting early matters more than investing more
Because growth compounds on growth, the number of months you stay invested affects the final value more than most people expect. Doubling your monthly SIP amount exactly doubles the future value, but doubling your investment duration (at the same monthly amount) more than doubles it, since the earlier contributions have longer to compound.