Systematic Investment Plans (SIPs) have become one of the most popular ways to accumulate wealth steadily. Among the various strategies, the 10-12-20 SIP rule is often highlighted as a simple formula to understand the power of long-term investing.
Let us explore how this works in detail.
The 10-12-20 rule states that if an investor puts aside ₹10,000 every month in an SIP and earns an estimated 12% annualised return, over a 20-year period the total corpus can grow close to ₹1 crore. It is a straightforward illustration of how consistent investments combined with compounding can generate significant wealth.
The foundation of this rule begins with a monthly contribution of ₹10,000. This consistent investment ensures discipline, as money is regularly set aside regardless of market conditions. Over the span of 20 years, the total invested amount adds up to ₹24,00,000.
The assumed annualised return in this rule is 12%. While market performance can vary, this figure is used as a benchmark for demonstrating compounding. Returns reinvested each year fuel the growth of the overall corpus.
A time horizon of 20 years plays a crucial role. Compounding is most effective over the long term. By staying invested for two decades, the invested money and the returns on it continue to multiply, creating exponential growth.
At the end of 20 years, the estimated corpus is ₹99,91,479. Out of this, the invested amount is ₹24,00,000 while the estimated returns contribute ₹75,91,479. This breakdown shows the immense role of compounding in wealth creation.
Investors can also use a SIP calculator to estimate the future value of their monthly contributions and better understand the impact of compounding.
Read More: What is 7-5-3-1 Rule in Mutual Fund SIP Investment?
The rule is not just about numbers but also about financial discipline. It demonstrates how patience, consistency, and the power of compounding can together create a large corpus. Even though actual returns may differ depending on market conditions, the rule serves as a guiding example of how long-term investing works.
Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in securities are subject to market risks. Read all related documents carefully before investing.
Published on: Sep 16, 2025, 3:04 PM IST
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