Does Long-Term Equity SIP Investing Work? (110-Year Analysis)

VS FINTECH
Sep 8
3 min read

Published on September 8, 2025 | VS Fintech Pvt Ltd

Introduction

“Invest regularly in equity mutual funds via SIP, and you will build wealth in the long run.”This is perhaps the most common advice investors hear. But does it really work?

To answer this, we analysed over 110 years of S&P 500 data (USA) and 40+ years of Sensex data (India) to test whether systematic investing in equity consistently delivers inflation-beating returns.

For this study, we define:

Long term: Minimum 15 years of investing.
Successful SIP: Returns that are comfortably higher than consumer price inflation (CPI).

1. Equity Returns vs Inflation: What to Expect

Equity markets are not obligated to give you high returns; their only “job” is to beat inflation over long horizons.
Even in long-term investing, returns are cyclical and volatile.
A successful SIP should be judged relative to inflation—not against unrealistic expectations like 15–20% per annum.

2. The 110-Year S&P 500 SIP Analysis (USA Data)

We looked at 15-year rolling SIP returns from the S&P 500 Total Return Index (TRI) and compared them with the 15-year average US CPI inflation.

Result: SIP returns usually beat inflation, but not always.
In some 15-year periods, returns were 0% or only slightly above inflation.
At times when inflation averaged ~5%, SIPs still held up reasonably well.

👉 Key Insight: While equity SIPs don’t guarantee high returns, they provide a reasonable chance of beating inflation over 15 years.

3. The 40+ Year Sensex SIP Analysis (India Data)

We examined Sensex price data from 1979, adding 2% to account for dividends (since full TRI data is only available from 1999). Results were compared with:

CPI inflation (India)
PPF returns (Public Provident Fund, a safe fixed-income benchmark)
Result:
- SIPs in Sensex generally outperformed both CPI and PPF.
- In the 1990s, PPF rates were unusually high (due to government fiscal stress), sometimes higher than inflation.
- Despite this, SIPs comfortably beat CPI in most periods.

👉 Key Insight: Indian equity SIPs have shown stronger inflation-beating potential than fixed-income alternatives over 15+ years.

4. Asset Class Success vs Investor Success

There is a difference between:

Asset Class Winning: Equity delivers positive real returns.
Investor Winning: The investor is satisfied after taxes and relative to expectations.

Example:

If inflation = 3% and SIP return = 4% (pre-tax), the asset class wins.
But after tax, real return may drop to 0% or negative → investor disappointment.

This gap between expectation and reality is called the “Expectation Gap”.

If expectations are too high, even positive real returns feel like failure.
Managing expectations + correct asset allocation = investor success.

5. Key Takeaways

Equity is the right asset class to fight inflation, but outcomes are not guaranteed.
15-year SIPs usually beat inflation, but returns fluctuate widely.
Average returns are misleading—rolling return analysis shows both risks and opportunities.
Blind SIP investing is not enough—risk must be managed through asset allocation and goal-based investing.
Expectation management is crucial—lowering return expectations reduces panic and behaviour-driven mistakes.

Conclusion

So, does long-term equity SIP investing work?

Yes, equity SIPs have historically provided a reasonable chance of beating inflation over 15 years or more.
No guarantees—returns can vary, sometimes even dropping to zero in certain 15-year periods.
The key is not just investing systematically, but also managing risk systematically, setting realistic expectations, and diversifying your portfolio.

Equity remains the best tool to combat inflation, but success depends as much on investor behaviour and planning as on the markets themselves.

✅ Bottom Line: Long-term SIP investing works as a strategy to beat inflation, but only when paired with smart asset allocation and realistic expectations.