Sip Calculator

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SIP Calculator

Invested Amount:
Estimated Returns:
Total Value:
function calculateSIP() { var P = parseFloat(document.getElementById("monthlyInvestment").value); var annualRate = parseFloat(document.getElementById("annualReturnRate").value); var years = parseFloat(document.getElementById("investmentPeriod").value); if (isNaN(P) || isNaN(annualRate) || isNaN(years) || P <= 0 || annualRate <= 0 || years <= 0) { alert("Please enter valid positive numbers for all fields."); return; } var i = (annualRate / 100) / 12; var n = years * 12; // SIP Formula: FV = P * [({(1 + i)^n} – 1) / i] * (1 + i) var futureValue = P * ((Math.pow(1 + i, n) – 1) / i) * (1 + i); var totalInvested = P * n; var estimatedReturns = futureValue – totalInvested; document.getElementById("investedAmountDisplay").innerText = totalInvested.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById("estimatedReturnsDisplay").innerText = estimatedReturns.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById("totalValueDisplay").innerText = futureValue.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById("sip-results").style.display = "block"; }

Understanding the Systematic Investment Plan (SIP)

A Systematic Investment Plan (SIP) is a disciplined method of investing a fixed sum of money at regular intervals (usually monthly) into a mutual fund or equity portfolio. Unlike a lump sum investment, where you invest a large amount at once, a SIP allows you to participate in the financial markets with smaller, manageable amounts.

How Does the SIP Calculator Work?

This calculator uses the concept of the Future Value of an Annuity Due. Because payments are typically made at the beginning of each period, the interest starts accruing immediately. The formula used is:

FV = P × [((1 + i)n – 1) / i] × (1 + i)
  • P: The amount you invest every month.
  • i: The periodic (monthly) rate of return (Annual Rate / 12 / 100).
  • n: The total number of payments (Years × 12).

Benefits of SIP Investing

  1. Rupee Cost Averaging: When the market is low, your SIP amount buys more units; when the market is high, it buys fewer units. Over time, this averages out the cost of your investment.
  2. The Power of Compounding: Reinvesting the returns earned on your principal leads to exponential growth over long periods. The earlier you start, the greater the compounding effect.
  3. Financial Discipline: Automating your investments ensures that you save before you spend, helping you achieve long-term financial goals like retirement or education.

Practical Example

Suppose you decide to invest 5,000 per month in a diversified mutual fund. If the fund provides an average annual return of 12% and you stay invested for 15 years:

  • Total Invested: 5,000 × 12 × 15 = 900,000
  • Estimated Returns: Approximately 1,622,880
  • Total Wealth Created: Approximately 2,522,880

As seen in the example, the wealth gained (returns) can often exceed the actual amount invested if the duration is long enough, showcasing the effectiveness of the SIP strategy.

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