But how much of it is a rule, and how much is simply a planning assumption?
Financial planners say the framework can help investors structure long-term investments, but its three “10s” are not equally certain. The investment horizon and annual step-up are decisions investors control. Returns are not.
Understanding that distinction, they say, is key to deciding whether the strategy fits one’s financial goals.
What is the 10-10-10 SIP rule?The framework is built around three assumptions:
- Invest through a Systematic Investment Plan (SIP) for at least 10 years.
- Increase the SIP amount by 10% every year.
- Use a 10% annualised return while estimating long-term wealth.
The underlying idea is to keep investments growing alongside income instead of investing a fixed amount throughout the investment journey.
Is a 10% annual return realistic?
Experts say a 10% return is a reasonable assumption for financial planning, but it should not be interpreted as an assured outcome.
Charu Pahuja, CFP CM, Director & Chief Operating Officer, Wise FinServ, an Indian financial services and wealth management company, says equity mutual funds do not deliver the same returns every year. Even over a decade, returns depend on factors such as market cycles, the investment start date and the type of fund.
While diversified equity funds have historically generated annualised returns of around 10-12% over longer periods, she says investors should avoid anchoring financial goals to a fixed return expectation.
Ashok Suvarna, CEO, Aditya Birla Money, a full-service financial services firm and stock broker, also considers 10% a reasonable planning benchmark, but says actual returns will vary depending on market conditions, fund performance and the length of time an investor remains invested.
According to him, investors should be prepared for periods of both strong and weak returns rather than expect steady year-on-year gains.
Who is this strategy meant for?
The framework is generally better suited to investors whose income is likely to increase over time.
According to Suvarna, the principle behind a step-up SIP is simple:
as income grows, investments also increase, allowing a larger amount to benefit from compounding over the long term.
However, he says there is no requirement to raise SIPs by exactly 10% every year. The increase should reflect an investor’s financial situation, expenses and long-term goals.
Pahuja shares a similar view, saying someone receiving a modest salary hike may choose a smaller increase, while those with stronger income growth may comfortably step up investments by more than 10%.
The objective, she says, is to make sure investments grow alongside income, not to follow a fixed percentage mechanically.
Should you continue SIPs when markets fall?
Market corrections often tempt investors to pause or reduce their SIPs, but experts say short-term volatility alone should not drive investment decisions.
Pahuja says one of the most common mistakes investors make is stopping SIPs during market declines. Regular investments buy more units when markets are lower, allowing investors to accumulate additional units at relatively cheaper prices.
Suvarna adds that if an investor’s income, cash flow and financial goals remain unchanged, a market correction alone is generally not a reason to discontinue SIPs.
Mayank Prakash, Co-Founder & Director, aarthiq, a technology-driven financial services platform offering wealth management, says investors often stop contributing when markets fall and resume only after confidence returns, potentially missing part of the recovery.
Instead of reacting to market swings, he says investors should periodically assess whether their investment strategy still aligns with their financial circumstances.
What should investors check before adopting the rule?
Financial planners say affordability should take precedence over sticking to a formula.
It’s better to build an emergency fund, maintain adequate health and life insurance, and keep debt at manageable levels before committing to higher annual SIP contributions.
Suvarna recommends reviewing investments periodically because investing more increases the amount invested, but does not guarantee a higher rate of return.
Prakash adds that investors should revisit their SIP strategy as income, expenses and long-term objectives evolve, ensuring the framework continues to fit their financial situation.
