Mutual fund systematic investment plans (SIPs) are quite popular with retail investors. This is because SIPs democratise mutual fund investment, deliver a high degree of convenience and allow investors to spread their money across a long time period, thereby cutting risks associated with one-time/lump sum investing.

But, how much have investors got by investing in SIPs for long periods such as 10 years? Here is a curated list of 10 equity funds, most belonging to small-cap category, that delivered massive returns in the last 10 years. If one diligently invested ₹25,000 per month for 10 years in these funds, they would be sitting on a corpus worth ₹75 lakh to ₹1 crore now. And if they were smart enough to step-up the SIP, the gains would be even bigger.

SIPping their way to riches

Using a filter of actively-managed equity funds with AUM of at least ₹5,000 crore and 10-year NAV history (regular, growth plans), schemes such as Nippon India Small Cap, SBI Small Cap, Kotak Small Cap, Mirae Asset Emerging Bluechip, ICICI Prudential Technology, came on top of 10-year SIP returns chart. DSP Small Cap, HDFC Small Cap, Kotak Emerging Equity, Edelweiss Midcap and SBI Technology Opportunities are also among the list.

Investing ₹25,000 per month for 10 years i.e. total investment of ₹30 lakh in each fund would have created a corpus of minimum ₹75 lakh to ₹1 crore (see table below). From a pure return perspective, these 10 best SIP funds clocked 17-22 per cent per annum.

With passively-managed funds garnering quite a bit of attention, let us compare how your SIP returns would be. So, if you did the same exercise for a Nifty index fund, which means investing ₹25,000 SIP per month for 10 years, it would have given you ₹58 lakh i.e. roughly twice the total investment. That’s around 12.7 per cent return p.a.

Here is how you can plan and invest in SIPs.

Stepping up SIPs

Many investors increase their investment every year, thanks to better income. Let us see what would have happened if you increased your ₹25,000 SIP (p.m) by 5 per cent and 10 per each year. Your total investment would be ₹37.7 lakh (5 per cent step up annually) and ₹47.7 lakh (10 per cent step up annually) compared to ₹30 lakh (no step up). The best 10 SIP funds from our list would have delivered bigger gains for sure. (see table below).

For instance, stepping up Rs 25,000 per month SIP by 5 per cent in Nippon India Small Cap Fund would create a corpus of ₹1.15 crore and at 10 per cent step up would create a corpus of ₹1.35 crore.

Riding out volatility

Make no mistake about it, SIP investing is not a one-way ascent. In a SIP, you invest small/big sums at different points in time over your investment tenure. But, markets have a mood of their own. They may rise, fall, stay flat, etc. over this period. Take a look below at how the net asset value of three mutual funds behaved over the last 10 years.

As you can see, there have been highs and lows. As a SIP investor, this volatility gives you the opportunity to practice rupee cost averaging and also in investing in a disciplined manner.

Common sense suggests that “Buying low and selling high” is perhaps the best way to get good returns on your investments. But this is easier said than done, even for the most experienced investors. SIP is a simpler approach to long-term investing is disciplining and committing to a fixed sum for a fixed period and sticking to this schedule regardless of the conditions of the market.