When Does SIP Compounding Actually Kick In? Neeraj Arora Explains the 15-Year Rule
"You've fixed the match, and you've fixed it in your favour. You will win. But people can't stand simply winning. They want to win with thrill. And while chasing that thrill, they lose."
That's how personal finance expert Neeraj Arora summed up the biggest mistake Indian investors make, in a recent episode of the Accompany Akki podcast. Here are his answers to the questions people ask most often about SIPs, compounding, and why so many investors give up too early.
When does SIP compounding become noticeable?
Later than most people expect. According to Neeraj, you spend roughly the first eight years just building up the corpus. After that, growth starts to become visible.
"In the 10th year, the 11th year, the 12th year, you will be surprised," he said. "The returns you see in a single day will amaze you."
In his view, the substantial effect of an SIP appears after 12 to 15 years. "Honestly, if you want to see what an SIP can do, give it 15 years."
Why does an SIP feel like a mistake in the early years?
"If you're doing an SIP and you look at it after seven years, you'll feel like it's the worst decision of your life," Neeraj said.
The reason is how an SIP is built. You don't invest one lump sum. You invest small amounts every month, so for the first several years most of your balance is your own contributions. The base is small, so the growth looks small too.
Once the corpus is large, that changes. A single 1% market move can then be worth more than a whole month's SIP.
To see the effect, here's an illustrative example of a ₹10,000 monthly SIP, assuming roughly 12% annual returns compounded monthly (actual returns vary and aren't guaranteed):
| Years | Amount invested | Approximate value |
|---|---|---|
| 5 | ₹6 lakh | ₹8.2 lakh |
| 10 | ₹12 lakh | ₹23.2 lakh |
| 15 | ₹18 lakh | ₹50.5 lakh |
| 20 | ₹24 lakh | ₹99.9 lakh |
The last five years add nearly as much as the first fifteen combined. That's the curve most people quit before reaching.
What matters more: returns, principal, or time?
Neeraj uses the simple interest formula, Principal x Rate x Time divided by 100, to make his point.
"The whole world focuses on only one thing, the return," he said. "And that is the biggest stupidity."
You can't control returns. You can control your principal, meaning how much you invest and whether you keep increasing it. You can also control time, meaning how long you stay invested. If you keep raising your principal and give it enough time, you've fixed the match in your favour.
Why does fast wealth take longer?
Neeraj shared a line from investor Gurmeet Chadha: "If you want to create wealth, it will take 20 years. If you want to create wealth fast, it will take 30 years."
People chasing quick money usually spend their first ten years making mistakes and losing money before they accept that wealth can't be rushed.
Should you stop your SIP to invest in your own business?
Host Akash Kumar asked this from his own experience. After starting his company, he redirected his monthly investments into the business while leaving his existing corpus invested.
Neeraj supported it. "If you're developing your own business, put in as much money as you can." At an early stage, what counts is vision: the belief that you can grow the business, backed by real effort.
"At the end of the day, the path to wealth creation is business," he said. You can start one, or become a partial owner of large businesses through mutual funds and the stock market. Salaried investors shouldn't feel pressure to become founders. "Don't fall into FOMO because some influencer said wealth can only be created through business."
Why do most people lose money in mutual funds?
Neeraj gives two connected reasons: financial illiteracy, and the behaviour that follows from it.
Markets are unpredictable. They can stay flat for years, rise sharply, then fall hard. "Markets teach anyone who tries to act like the boss that they're nothing," he said. Investors who aren't prepared for this panic and sell at the worst time.
Underneath that is a weak foundation, which usually means no emergency fund. Neeraj once asked a camera operator why he didn't invest. The man said he feared needing the money right after a market crash. "He has this fear because he doesn't have an emergency fund," Neeraj realised. Fear comes from a lack of clarity.
He also warned against flashy advice. One example is the suggestion to put your credit card's interest-free period money into small-cap funds. "Small-cap funds go the other way too," he pointed out.
Is a ₹1,000 SIP worth starting?
Yes, because the habit matters more than the amount. Akash started with ₹5,000 a month at the start of his career and credits that early discipline today.
Neeraj says discipline has to come from within. "Nobody goes to Virat Kohli and says, 'Brother, practise.' He knows he wants to improve, so he practises."
Key takeaways
Give your SIP at least 12 to 15 years before you judge it. Put your attention on principal and time, not on chasing returns. Build an emergency fund before you invest so a market fall never forces you to sell. Be sceptical of advice that sounds exciting.
As Neeraj put it, anything in life that matters, from your health to your career to your wealth, is long-term by nature.
This article is for educational purposes only and is not financial advice. Please consult a qualified advisor before making investment decisions.
Watch the full episode: https://youtu.be/n1b5R83du60
Join the Accompany Akki WhatsApp community: https://wa.openinapp.co/a46ji
How many years has your longest-running SIP been going, and have you seen the curve bend yet?
