Compounding means returns themselves start earning returns. For SIPs and FDs alike, time in the market usually matters more than a perfect entry month — but compounding also works against you on high-interest debt.
The basic idea
If ₹1,00,000 grows 10% in year one, you have ₹1,10,000. Year two’s 10% applies to ₹1,10,000, not just the original principal. Over long horizons that snowball is why retirement and education calculators care so much about years.
SIPs and compounding
Each SIP installment compounds for a different length of time. Early contributions work longest; later ones add less growth but still add principal. That is why starting earlier often beats waiting to invest a larger amount.
What calculators assume
EnrichReturns SIP and goal tools typically convert an annual assumed return into a monthly rate and compound smoothly. Real NAV paths zigzag. Taxes and expense ratios reduce what you keep — bake conservatism into the assumed rate rather than treating the chart as a promise.