SIP (Systematic Investment Plan) Calculator
Calculate your future wealth based on monthly mutual fund investments
Investment Summary
Understanding the Power of SIP
A Systematic Investment Plan (SIP) is a disciplined method of investing in mutual funds. Instead of making a lump-sum investment, you contribute a fixed amount regularly (usually monthly). This approach leverages the power of compounding and rupee-cost averaging to grow your wealth over the long term.
How Does the SIP Calculation Work?
The SIP calculator uses the future value of an annuity-due formula to estimate the maturity value of your investments. The formula used is:
- FV: Future Value of the investment
- P: Monthly Investment amount
- i: Monthly rate of interest (Annual Rate / 12 / 100)
- n: Total number of months (Years × 12)
Example: The Cost of Waiting
Consider an investor who starts a monthly SIP of $500 with an expected return of 12% per year:
| Period | Total Invested | Future Value |
|---|---|---|
| 10 Years | $60,000 | $116,170 |
| 20 Years | $120,000 | $499,574 |
| 30 Years | $180,000 | $1,764,957 |
Notice how in the last 10 years, the wealth grows exponentially despite the investment amount remaining the same. This is the Power of Compounding in action.
Benefits of Starting an SIP
- Rupee Cost Averaging: You buy more units when prices are low and fewer when prices are high, reducing the average cost per unit.
- Financial Discipline: Automating your savings ensures you invest before you spend on non-essentials.
- Flexibility: You can start with as little as $10-$50 depending on the fund provider.
- Compound Interest: Small amounts invested over a long period can lead to a substantial corpus.