A SIP (Systematic Investment Plan) is a method of building wealth through small, regular investments — instead of trying to time the market with a large sum, you invest a fixed amount consistently each month. The returns come from compounding and, for market-linked investments, from the long-term growth of the underlying assets.
How a SIP Works
- Choose a fixed amount (e.g., Rs 5,000 per month).
- This amount is automatically invested on a set date each month.
- Each investment buys units of the fund at that month's price.
- Over time, units accumulate and compound.
The compounding comes from the returns themselves being reinvested — earning returns on returns over subsequent periods.
What Rs 5,000/Month Can Grow To
At different annualised return rates:
| Annual return | 5 years | 10 years | 15 years | 20 years |
|---|---|---|---|---|
| 8% | Rs 3.67 lakh | Rs 9.21 lakh | Rs 17.4 lakh | Rs 29.5 lakh |
| 12% | Rs 4.08 lakh | Rs 11.6 lakh | Rs 25.1 lakh | Rs 49.9 lakh |
| 15% | Rs 4.42 lakh | Rs 13.9 lakh | Rs 33.4 lakh | Rs 75.8 lakh |
*(Total contributed at Rs 5,000/month over 20 years = Rs 12 lakh. The rest is growth.)*
Rupee-Cost Averaging
Because you invest the same amount every month regardless of market conditions:
- Low price month → you buy more units.
- High price month → you buy fewer units.
- Average cost per unit tends to be lower than if you invested everything at one price.
This doesn't eliminate risk but smooths out the effect of market timing.
What to Be Realistic About
- Returns are not guaranteed and fluctuate year to year.
- Historical mutual fund returns in Pakistan's equity markets have averaged roughly 12–18% in good periods, but this includes volatile years with losses.
- The table above assumes consistent return rates — real returns are uneven.
Use SIP Calculator to model specific amounts, durations and assumed return rates. For the underlying compound interest mechanics that drive SIP returns, see how compound interest grows your savings.
Mutual Funds in Pakistan
Mutual funds in Pakistan are regulated by the Securities and Exchange Commission of Pakistan (SECP). Asset management companies including Meezan Investments, HBL Asset Management and NBP Funds offer SIP-style systematic investment options in equity, income and balanced funds. Minimum investment amounts and profit rates vary by fund. Past returns are published by fund management companies and MUFAP (Mutual Funds Association of Pakistan). Before investing, confirm the fund's investment policy, risk category and fee structure. SIP Calculator models expected growth at any assumed return rate.
