SIP (Systematic Investment Plan) Calculator
Estimate your future wealth by investing regularly in mutual funds.
What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan (SIP) is a disciplined way of investing in mutual funds where you contribute a fixed amount of money at regular intervals (monthly, quarterly, or yearly) instead of making a one-time lump sum investment. This approach is widely considered one of the most effective ways for retail investors to build long-term wealth.
How Does the SIP Calculator Work?
This SIP calculator uses the formula for the future value of an ordinary annuity to estimate your returns. The calculation takes into account the power of compounding, where the interest you earn also earns interest over time. The formula used is:
FV = P × [({1 + i}n – 1) / i] × (1 + i)
Where:
P = Monthly investment amount
i = Monthly interest rate (Annual rate / 12 / 100)
n = Total number of monthly installments (Years × 12)
If you invest $500 per month for 15 years at an expected return of 12% per annum:
– Your total investment would be: $90,000
– Your estimated returns would be: $162,283
– Your total corpus would be: $252,283
Benefits of SIP Investing
- Rupee Cost Averaging: You buy more units when prices are low and fewer units when prices are high, lowering your average cost per unit over time.
- The Power of Compounding: Starting early allows your small monthly contributions to grow exponentially over long periods.
- Financial Discipline: Automating your investments ensures you stay consistent with your financial goals regardless of market volatility.
- Convenience: You can start with as little as $50 or $100, making it accessible for everyone.
Is the SIP Return Guaranteed?
No, mutual fund returns are subject to market risks. While historical data shows that equity markets tend to provide strong returns over 10-20 years, actual returns can vary. This calculator provides an estimate based on your chosen percentage rate to help you plan your financial future.