Almost every investor is familiar with the term ‘invest in SIPs for the longer term’. It’s a piece of common advice when it comes to beginning a SIP for investing in mutual fund schemes. One of the best advantages in Systematic Investment Plans (SIPs) are the power of compounding if invested in the long run.
What is the ideal investment time horizon for SIPs? Is 3 years an ideal investment horizon, or is it 5 years, or is 15 years a better option, or in between years? The questions continue to go on. The first and foremost point to remember is that the longer the tenure of investment in SIPs, the better the returns. Let’s understand this with report of return in SIP mentioned below:
| SIP Report | 3 Years | 5 Years | 8 Years | 10 Years | 12 Years | 15 Years |
| Maximum Return | 52.4% | 50.0% | 40.8% | 29.6% | 21.7% | 18.1% |
| Minimum Return | -36.2% | -10.5% | 1.4% | 4.6% | 6.2% | 7.4% |
| Average Return | 13.0% | 15.2% | 16.3% | 15.8% | 14.7% | 14.3% |
| Median Return | 12.3% | 13.0% | 14.2% | 14.2% | 13.8% | 14.8% |
| % Times Positive Return | 83% | 91% | 100% | 100% | 100% | 100% |
| % Times More Than 8% Return | 63% | 81% | 94% | 98% | 99% | 99% |
| % Times More Than 10% Return | 55% | 71% | 80% | 94% | 98% | 97% |
| % Times More Than 12% Return | 51% | 57% | 67% | 77% | 74% | 89% |
The above data shows that the average return in a 3-year SIP period is around 13%, while the median return is around 12.3%. For a 5-year SIP period, the average return is around 15.2%, and the median return is around 13%. If the SIP period is for 8 years, the average and median return comes to around 16.3% and 14.2%. But in the case of a 10-year SIP period, the average and median return is around 15.8% and 14.2%. For a 12-years period, the average and median return is around 14.7% and 13.9% respectively. In the case of a 15-years SIP period, the average return comes to around 14.3% and the median return is around 14.8%.
Outcome: – If you are investing through SIP in Equity Fund you should have minimum time frame of 5 Years. 91% of time you will have positive return. 71% of the time you will have more than 10% returns p.a. and this number changes to 94% if you continue SIP for 10 Years.
