How Does the SIP Calculator Work?
A Systematic Investment Plan (SIP) allows you to invest a fixed amount every month in a mutual fund scheme. Our SIP calculator uses the standard future value formula for recurring investments to compute exactly how your money compounds over time.
The SIP Formula
The future value of a SIP is calculated as:
Where:
P = Monthly investment amount
r = Monthly rate of return (annual rate ÷ 12 ÷ 100)
n = Total number of months (years × 12)
Worked Example
Let's say you invest ₹10,000 per month for 10 years expecting 12% annual return:
- Monthly rate (r) = 12 / 12 / 100 = 0.01
- Months (n) = 10 × 12 = 120
- Total Invested = ₹10,000 × 120 = ₹12,00,000
- Maturity Value = ₹10,000 × [(1.01¹²⁰ − 1) / 0.01] × 1.01 ≈ ₹23,23,391
- Returns = ₹23,23,391 − ₹12,00,000 = ₹11,23,391
This illustrates the power of compounding — you earn returns not just on your invested amount, but also on the returns already earned.
Tips to Maximise Your SIP Returns
Start as early as possible — even a 5-year head start can add lakhs to your final corpus. Consider increasing your SIP amount by 10% every year (step-up SIP) as your income grows. Stay invested through market cycles and avoid pausing SIPs during downturns, as those dips are often the best time to accumulate units at lower prices.
Frequently Asked Questions
What is a SIP calculator?
A SIP (Systematic Investment Plan) calculator estimates the future value of your monthly investments based on an assumed annual return rate and investment duration. It uses the compound interest formula to project how your wealth grows over time.
How accurate is the SIP calculator?
Our SIP calculator uses the exact financial formula: FV = P × [(1+r)^n − 1] / r × (1+r), where r is the monthly rate. The calculation is mathematically precise, but actual mutual fund returns vary with market conditions and are never guaranteed.
What is a good return rate for SIP in India?
Historically, Indian large-cap equity mutual funds have delivered 10–14% annualised returns over 10+ year periods. Small-cap and mid-cap funds may offer higher returns with higher risk. For planning, many advisors suggest 10–12% as a conservative estimate.
Is SIP better than a fixed deposit?
SIPs in equity mutual funds have historically outperformed fixed deposits over long periods (10+ years). However, SIPs carry market risk, while FDs offer guaranteed returns. The right choice depends on your risk appetite and time horizon.
Can I start a SIP with ₹500?
Yes! Many mutual funds allow SIPs starting from ₹100–₹500 per month. The power of compounding works regardless of the amount — starting small and increasing over time (step-up SIP) is a very effective wealth-building strategy.