SIP Returns Calculator
Estimate the potential growth of your mutual fund investments via Systematic Investment Plans.
What is a SIP Calculator?
A SIP (Systematic Investment Plan) calculator is a tool that helps investors estimate the returns from their mutual fund investments made through a SIP route. Unlike a lump sum investment, a SIP allows you to invest a fixed amount regularly (monthly, quarterly, or half-yearly), which leverages the power of compounding and rupee-cost averaging.
How Does the SIP Formula Work?
The calculator uses the future value of an annuity-due formula to determine the maturity amount. The formula applied is:
FV = P × [({(1 + i)^n} – 1) / i] × (1 + i)
- P: Monthly investment amount
- i: Periodic rate of interest (Annual rate / 12 / 100)
- n: Total number of installments (Years × 12)
Example Calculation
Suppose you invest $200 every month for a period of 5 years at an expected annual return of 10%.
- Total Invested: $12,000
- Wealth Gained: $3,585
- Total Value: $15,585
Over time, the "Wealth Gained" component grows exponentially due to compounding, where you earn returns on your previous returns.
Benefits of Using a SIP
Investing via SIP encourages financial discipline. By automating your savings, you avoid the pitfalls of "timing the market." When prices are low, your fixed SIP amount buys more units; when prices are high, it buys fewer units, effectively lowering your average cost per unit over the long term.