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The 10-10-10 SIP Rule: A Simple Formula for Long-Term Wealth
The 10-10-10 SIP rule: invest for 10 years with 10% assumed returns, and step up contributions 10% yearly. Regular investing with annual increases can boost the final corpus by nearly ₹10 lakh, explains Charu Pahuja.
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Building wealth through mutual fund SIPs does not require timing the market or picking the perfect fund. A rule of thumb known as the 10-10-10 SIP rule offers a disciplined path: invest for at least 10 years, assume a 10% annual return as a working estimate. Increase the SIP amount by 10% each year.
Charu Pahuja, Director & Chief Operating Officer at Wise FinServ, explained the logic in a recent article.
"You do not need the perfect fund or the perfect time to build wealth. Regular investing and patience matter much more. That is what the 10-10-10 SIP rule is about. Start a SIP, continue it for at least 10 years, use 10% annual return as a working estimate and raise the SIP amount by 10% every year. Take a simple example. Someone starts with a SIP of ₹ 10,000 a month. The next year, it becomes ₹ 11,000. By the third year, the monthly amount would be ₹ 12,100. Since the increase happens slowly, it can usually be managed as the person's income also grows."
The impact of the annual step-up is significant even with modest assumptions. Pahuja compared a fixed ₹10,000 monthly SIP with one increased by 10% each year, both over 10 years with 10% annual returns. The fixed SIP would accumulate roughly ₹20.48 lakh. The stepped-up SIP would reach nearly ₹30.45 lakh, an extra ₹10 lakh from gradually larger contributions.