SIP Investment Calculator
Calculate the future value of your Mutual Fund SIP investments
Understanding SIP: The Path to Wealth Creation
A Systematic Investment Plan (SIP) is a financial strategy that allows you to invest a fixed amount of money at regular intervals into a mutual fund. Instead of making a large lump-sum investment, SIPs promote financial discipline and leverage the power of compounding and rupee-cost averaging.
How Does the SIP Calculation Work?
The SIP calculator uses the future value of an annuity formula to estimate your wealth accumulation. The formula used is:
- M: Amount you receive upon maturity
- P: Amount you invest at regular intervals (monthly)
- i: Periodic rate of interest (Annual rate / 12 / 100)
- n: Total number of payments (Months)
Benefits of Using a SIP Calculator
Predicting the growth of your investments helps in setting realistic financial goals. Whether you are planning for retirement, your child's education, or buying a new home, knowing your potential returns is crucial. Key benefits include:
- Goal-Based Planning: Determine exactly how much you need to save every month.
- Visualizing Compounding: See how staying invested for longer periods exponentially increases your wealth.
- Accuracy: Manual calculations for compound interest can be complex and prone to errors.
Real-World Example
Imagine you start an SIP of $500 per month for a period of 15 years. If the expected annual return is 12%, here is how your money grows:
| Metric | Value |
|---|---|
| Total Invested Amount | $90,000 |
| Wealth Gained (Returns) | $162,293 |
| Total Value after 15 Years | $252,293 |
As seen in the example, your returns ($162,293) are significantly higher than your actual investment ($90,000) due to the compounding effect over 15 years.