The Power of Compounding in a SIP: Why Time Beats Timing

Compounding looks slow at first, then surprisingly fast. That is why so many people underestimate it and stop too soon.

“The first rule of compounding: never interrupt it unnecessarily.”Charlie Munger

How does compounding work in a SIP?

That is ₹10,000 a month at an assumed 12%, which is not guaranteed. In the final five years, your money gains more than in the first fifteen combined. That is why stopping early costs so much.

What is the Rule of 72?

Divide 72 by the yearly return to estimate how many years it takes money to double. At 12%, money doubles in about 6 years. At 6%, it takes about 12. The rule also applies to inflation: at 6%, prices roughly double in 12 years.

Which matters more, the amount or the time?

Time usually wins. A ₹5,000 SIP from 25 to 60 could reach about ₹3.25 crore at 12%, while the same SIP from 35 to 60 could reach about ₹94.88 lakh. See the full comparison, or measure your own in the SIP Delay Calculator.

What can weaken compounding?

• Withdrawals: taking money out early removes the future growth on it.
• High costs: a 1% yearly difference is large over decades. See the numbers.
• Stopping in falls: you miss the cheaper units and the recovery.
• Inflation: compare your growth against rising costs, not just against zero.

Debt compounds as well, against you. Credit card interest works by the same maths, which is why clearing that debt comes first.