SIP Calculator

How Does the SIP Calculator Work?

A Systematic Investment Plan (SIP) is a disciplined way of investing in mutual funds where you invest a fixed amount at regular intervals, usually monthly. Our SIP Calculator helps you estimate the future value of your investments by taking into account the monthly SIP amount, investment duration, and the expected rate of return. This allows you to plan your financial goals more effectively and understand how the power of compounding works in your favor.

Formula Used in SIP Calculation

The formula for calculating SIP maturity is:

FV = P × ((1 + r/n)^(n × t) - 1) × (1 + r/n) / (r/n)
Where:
FV = Future Value of the investment  
P = SIP amount (monthly investment)  
r = Annual rate of return (in decimal)  
n = Number of compounding periods in a year (12 for monthly)  
t = Total duration in years

Example 1: Short-Term Goal

Suppose you invest ₹5,000 per month in a mutual fund via SIP for 5 years at an expected annual return of 12%. Using the formula, the maturity amount will be approximately ₹4.1 lakhs. Here, your total investment is ₹3 lakhs, and the interest earned is about ₹1.1 lakh. This can help you achieve short-term goals like buying a bike, funding a vacation, or creating an emergency fund.

Example 2: Long-Term Wealth Creation

Now let’s say you invest ₹10,000 per month for 20 years with an expected return of 12% annually. The SIP Calculator shows that your maturity value will be close to ₹99 lakhs. Out of this, your invested amount is ₹24 lakhs, while the interest earned through compounding is around ₹75 lakhs. This demonstrates how long-term SIPs can help in wealth creation and achieving goals like retirement planning or children’s higher education.

Why Use Our SIP Calculator?

Helps you estimate future wealth based on your SIP contributions.
Shows how different durations and rates of return impact maturity value.
Allows comparison between short-term and long-term SIP strategies.
Gives clarity on how much you should invest monthly to achieve a specific financial goal.

Final Thoughts

The SIP Calculator is a powerful tool for both beginner and experienced investors. It not only helps you plan your investments but also motivates you to stay consistent. Remember, the key to building wealth with SIPs is patience, discipline, and long-term commitment. Use our SIP Calculator regularly to track your progress and make informed financial decisions.