Why the ‘12% Magical SIP Return’ Is Misleading: Expert Explains the Real Math Behind Long-Term Investing

A recent post by SEBI-registered investment adviser Abhishek Kumar has sparked debate online for exposing a common yet misleading trick used in many viral SIP examples. His breakdown shows how a perfectly normal long-term investment can appear to generate shockingly low returns when nominal and inflation-adjusted numbers are mixed together.

Kumar questioned a popular claim circulating on social media: How can a ₹36 lakh SIP grow to only ₹38 lakh in 30 years at 12% annual returns? The answer, he said, has nothing to do with poor performance — it is simply bad mathematics.

The mistake lies in combining nominal values (actual rupees invested over time) with real, inflation-adjusted values (future money expressed in today’s rupees). According to Kumar, this is like comparing apples to oranges, and the resulting numbers will always look distorted.

He explained that the ₹36 lakh investment shown in the example represented actual money contributed over three decades. However, the final SIP corpus presented — ₹38 lakh — had been adjusted for inflation. This mismatch makes it appear as if even a 12% return barely beats inflation, which is completely incorrect.

Kumar highlighted three fundamental errors in the flawed calculation. First, it adjusted only the final corpus for inflation but not the invested amount. Second, it adjusted the maturity value without adjusting taxes, commissions, or fees for inflation. Third, by treating only the end number as “today’s value,” it artificially shrank the final figure while leaving the invested amount at full nominal scale.

His recommendation is simple:
Either calculate every figure in nominal terms, or adjust every single number — investments, profits, fees, and taxes — for inflation.

Only then does the picture reflect accurate wealth creation.

Kumar noted that inconsistent inflation adjustments can mislead retail investors into believing that long-term SIPs barely generate real growth. However, historical market data shows that equities have comfortably outpaced inflation over extended periods, making SIPs one of the most reliable avenues for wealth building.

He urged investors to apply a basic sense-check before trusting viral financial charts: always ensure that both sides of a comparison are expressed on the same scale. When one number is inflation-adjusted and the other is not, the conclusion will always be false.

His closing thought resonated with many readers: “Not everything that looks like maths is good maths.”

The discussion serves as a timely reminder for investors to review financial claims critically and verify whether the calculations behind them are genuinely accurate — or simply designed to confuse.