My plan assumes 12 percent. What actually happens if I only get 8?
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A plan built on one return number is not a plan, it is a forecast. This page runs your SIP at the return you hope for and the return you fear, and prices the difference in both rupees and years.
The Assumption Nobody Stress Tests
Every SIP projection you have seen carries a return assumption, usually 12 percent, usually presented without a range. It is not a dishonest number; long-run Indian equity indices have delivered around that figure over multi-decade periods. It is simply a single draw from a wide distribution, and the plans built on it almost never ask what happens if the draw is lower.
The sensitivity is larger than intuition suggests because the shortfall compounds. A SIP running for twenty years at 10 percent rather than 12 does not end about 17 percent smaller in proportion to the rate; it ends roughly a quarter smaller, because every month of the shortfall is itself compounded for the remaining term. The longer the horizon, the wider the fan of outcomes.
The purpose of this model is not to predict which return you will get. It is to tell you, before you commit, how much of your goal depends on an assumption you cannot control, and which of the two available responses, investing more or waiting longer, closes the gap on terms you can live with.
Return Sensitivity Model
How to Read the Stress Test
The percentage drop is the number worth internalising. Four points of annual return sounds like a third of a 12 percent expectation, but over twenty years it removes closer to 40 percent of the corpus, because the shortfall in every single month is itself denied the chance to compound for the remaining term. This asymmetry is why long-horizon plans deserve a lower assumption than short ones, not a higher one.
The two remedies are not equivalent in difficulty. Raising the SIP requires money you may not have; adding years requires time you may not have either, and the years are usually the more expensive of the two if the goal has a fixed date such as a retirement or an admission. Where the goal is flexible, extending the horizon is almost always the cheaper adjustment.
One thing this model deliberately does not do is tell you which return will occur. A smooth 8 percent and a jagged path averaging 12 percent produce different outcomes for a SIP even when the arithmetic mean matches, because contributions buy more units when prices are low. That effect works in the investor’s favour and is a reason not to be excessively pessimistic, but it is not large enough to rescue a plan that only works at the top of the range.
What Changes the Answer
The asset mix behind the assumption
A 12 percent expectation is defensible for a diversified equity portfolio over a long horizon. It is not defensible for a portfolio that is half debt, where a blended expectation closer to 9 or 10 percent is more honest. Set the assumption from the actual allocation rather than from the equity component alone.
How long the money stays invested
Return dispersion narrows with time. Over three years, equity outcomes range enormously. Over fifteen or twenty, the range of annualised outcomes has historically been much tighter. A short horizon deserves a much more conservative assumption than a long one, which is the opposite of how most plans are built.
Costs, which are certain when returns are not
A one percentage point difference in expense ratio between a direct and a regular plan is deducted every year regardless of what the market does. Over twenty years that alone can account for a large share of the gap this model attributes to returns.
Whether you keep contributing through the bad years
The single largest destroyer of long-run SIP outcomes is not a lower return, it is stopping. A SIP paused for two years during a drawdown misses precisely the units bought at the lowest prices, which is the mechanism that makes averaging work at all.