SIP Calculator

The SIP (Systematic Investment Plan) calculator is a tool that helps you understand the potential future value of your mutual fund investments. By investing a fixed amount regularly, you can benefit from the power of compounding and rupee cost averaging. This calculator shows you how your small, regular investments can grow into a significant corpus over time.

How Our Calculator Works

This tool uses the future value formula for a regular series of payments to project your investment growth. You provide three key inputs:

1. Monthly Investment: The fixed amount you plan to invest every month.
2. Expected Return Rate: The annual rate of return you expect from your investment. For equity mutual funds, a long-term average of 12% is a common assumption, though returns are not guaranteed.
3. Time Period: The number of years you plan to stay invested.

The calculator then uses these inputs to estimate the total value of your investment at the end of the period, breaking it down into your total investment and the estimated returns.

Formula Explained

The future value (FV) of a SIP is calculated using the following formula:

FV = P × ( ( (1 + i)^n - 1) / i ) × (1 + i)

Where:

• P is the monthly investment amount.
• i is the monthly interest rate (annual rate / 12).
• n is the total number of investment months (years × 12).

A Worked Example

Let’s say you invest ₹5,000 per month for 10 years at an expected return rate of 12% p.a.

• P = 5,000
• i = 12% / 12 = 1% = 0.01
• n = 10 years * 12 = 120 months

Using the formula, the future value would be approximately ₹11,61,695. Your total investment over the period would be ₹6,00,000, meaning you earned over ₹5.6 lakhs in returns.

Frequently Asked Questions (FAQs)