Why The ‘12% SIP Return’ Is A Myth: Expert Explains What Investors Often Miss

Why That Viral SIP ‘Math’ Is Misleading: Expert Explains The Real Calculation Trap.

A recent LinkedIn post by Abhishek Kumar, Sebi-registered investment adviser and founder of Sahaj Money, is turning heads — not because it offers a secret investment formula, but because it exposes how easily numbers can be distorted to confuse investors.

In his post, Kumar asked, “How can Rs 36 lakh turn into Rs 38 lakh in 30 years even with 12% returns?” His answer? The math is flawed — because someone mixed two very different types of numbers: nominal (actual rupee value) and real (inflation-adjusted).

The Big Mistake: Mixing Real And Nominal Values

Kumar explained that in the viral example, the Rs 36 lakh invested over 30 years was in nominal terms — actual rupees invested — but the final amount of Rs 38 lakh was adjusted for inflation. That mix, he said, makes returns look far lower than they really are.

“Mixing real and nominal figures is like comparing apples to oranges,” he wrote. “You’ll always get a weird answer.”

By showing the investment in actual money but adjusting the maturity value for inflation, the calculation falsely suggests that the investment barely grew. The truth, however, is that such selective adjustments distort reality.

Where The Math Went Wrong

• According to Kumar, the misleading example made three basic errors:
• It used nominal (actual) money for the invested amount but inflation-adjusted value for the final corpus.
• It ignored inflation’s impact on taxes, fees, and contributions.
• It created an illusion that SIP returns barely keep up with inflation — something historical data clearly disproves.

“If you invest Rs 36 lakh in actual rupees, your profits, commissions, and taxes should also be shown in actual rupees,” Kumar clarified. “You can’t apply inflation selectively.”

How To Read SIP Returns Correctly

• Kumar advises investors to keep their calculations consistent. Either:
• Compare all numbers in nominal terms (without inflation adjustment), or
• Adjust every figure — investments, returns, taxes, and fees — for inflation.

“True wealth-building means comparing apples to apples,” he wrote. “If you want to understand the real impact of inflation, adjust everything for it — not just the final corpus.”

A Reminder For Retail Investors

Kumar’s post has sparked a broader conversation about how financial content online can mislead when numbers are presented selectively. His message to investors is simple: always check whether all figures are being compared on the same scale.

“Before believing viral finance posts, ask yourself — are the numbers all speaking the same language?” he said.

His closing question struck a chord with readers: “What’s the weirdest finance ‘math hack’ you’ve seen online?”

The takeaway? In personal finance, not every equation that looks neat on paper tells the truth. As Kumar reminds investors, good investing is built on sound logic — not optical illusions disguised as math.