Many people talk about Systematic Investment Plans or SIPs, but very few truly understand where the real power lies. SIPs may look slow in the beginning, and that’s where most investors lose patience. But the truth is that the real magic of SIPs starts only after seven years. (see the image below)
Once the compounding starts working for you, the growth begins to surprise you in ways you never imagined.
Understanding the Power of Compounding
Let’s assume a monthly SIP of ₹5,000 with an average return of 15% per year. In seven years, this SIP can grow to around ₹7 lakhs. Continue it for fifteen years, and it may reach ₹30 lakhs. Keep going for twenty-five years, and it can become ₹1.3 crores. This example shows how long-term compounding builds wealth quietly over time. The longer you stay invested, the more powerful the compounding effect becomes.
The Hidden Shift After Seven Years
In the first few years, most of your SIP corpus is made up of your own invested money. For example, after the first year, around 93% of your total amount is what you invested, and only 7% is the gain. Even after seven years, the principal amount still forms a large part of your corpus. But after this point, things begin to change rapidly. As the years pass, your gain becomes a larger and larger part of the total corpus. By the twenty-fifth year, nearly 80% or more of your total wealth can come from compounding gains alone.
Why Most People Miss Out
Most investors do not allow their SIPs to work for long enough. The average mutual fund investor in India stays invested for only about one and a half years. This short period is not enough for compounding to show its effect. When people don’t see big returns early, they feel disappointed and stop their SIPs. But the truth is that the early years are just the foundation. The real returns come much later. Those who stay patient and disciplined are the ones who see real wealth creation.
The Right Way to Look at Equity Investing
Equity investing is not about getting rich quickly. It’s about staying in the game for the long term. If you get early returns, that’s great — but it’s more about luck than skill. The real game begins after several years of patience and consistency. Having the right mindset is very important. You must accept that there will be years when markets do not give great returns. What matters is that you stay invested, do proper asset allocation, and allow your money the time it needs to grow.
