SIP Calculator

How a SIP works and how to read your projected returns

A Systematic Investment Plan (SIP) lets you invest a fixed amount in a mutual fund at regular intervals, usually every month. Instead of trying to time the market, you buy a little at a time. When prices are low you receive more units; when prices are high you receive fewer. Over time this averaging, known as rupee cost averaging, smooths out your purchase price.

The maths behind the calculator

The future value of a monthly SIP, with the instalment paid at the start of each month, is: FV = P × [((1 + i)ⁿ − 1) ÷ i] × (1 + i), where P is the monthly amount, i is the monthly rate of return (annual rate ÷ 12) and n is the number of months. The calculator uses this formula and shows invested amount, estimated gains and total value separately.

A worked example

Investing ₹5,000 a month for 10 years at an assumed 12% annual return gives roughly ₹11.6 lakh, while you invest ₹6 lakh. The rest, about ₹5.6 lakh, is estimated growth. Extending the same SIP to 20 years gives about ₹49.9 lakh from ₹12 lakh invested. The jump is not twice but more than four times because the growth itself earns returns. This is the compounding effect, and it is the strongest argument for starting early.

Why the return assumption matters most

Equity mutual fund returns are market linked and not guaranteed. Past performance does not predict future returns. Treat the 12% figure as an illustration, then try lower values such as 8% or 10% to see a more cautious picture. If your goal is only reachable at an optimistic return, the plan is fragile.

Step-up SIP: growing your instalment

If your income rises, increasing the SIP by 5 to 10 per cent every year can raise the final corpus dramatically. A ₹5,000 SIP growing 10 per cent a year for 20 years ends far above a flat ₹5,000 SIP, even though the early years look identical.

Choosing a goal-based amount

• Write the goal, the amount needed in today's money and the years left, for example a child's education in 15 years.
• Adjust the target for inflation, since costs rise each year.
• Work backwards: try different monthly amounts until the projected value meets the inflated target.

SIP versus lumpsum

A lumpsum invests everything at once and benefits if the market rises soon after, but suffers if you invest just before a fall. A SIP spreads that risk and suits people who earn monthly. If you have a large amount, some investors stagger it over several months through a systematic transfer.

Costs and taxes to keep in mind

Expense ratios reduce returns slightly every year, and direct plans usually have lower costs than regular plans. Gains are taxed according to the fund type and holding period, and the rules change, so check the latest provisions on the Income Tax Department website or with an adviser. The calculator shows pre-tax, pre-expense estimates.

Before you start

Keep an emergency fund and adequate insurance first, invest only money you will not need for the investment horizon, and read the scheme documents. Investor education material from SEBI is a reliable place to learn about risks, KYC and complaint handling. Mutual fund investments are subject to market risks.

Reviewing your SIP once a year

Check the plan every twelve months rather than every week. Compare the fund against its benchmark and similar funds over three to five years, confirm the goal and timeline are unchanged, and raise the instalment if your income has grown. Avoid stopping a SIP in a falling market purely out of fear, since the lower prices are when you accumulate more units; stop or switch only when the goal, risk comfort or the fund's long-term performance has changed.