SIP Returns Calculator
Estimate the future value of your Systematic Investment Plan (SIP) investments.
What is a SIP Calculator?
A SIP (Systematic Investment Plan) calculator is a powerful tool designed to help investors estimate the returns on their mutual fund investments made through the SIP route. Unlike a lump sum investment, a SIP allows you to invest a fixed amount regularly (monthly, quarterly, or half-yearly), making it an ideal strategy for long-term wealth creation and disciplined savings.
How Does SIP Compounding Work?
The magic of SIP lies in the power of compounding and rupee cost averaging. When you invest consistently, your returns earn further returns. Over a long period, even small monthly contributions can grow into a significant corpus. Rupee cost averaging ensures that you buy more units when prices are low and fewer units when prices are high, lowering your average cost per unit over time.
Example Calculation
If you invest $500 per month for 10 years with an expected annual return of 12%:
- Total Invested: $60,000
- Estimated Returns: $56,170
- Total Value: $116,170
As seen in this example, the wealth gained is nearly equal to the principal invested, demonstrating how time and compound interest work in your favor.
Benefits of Using a SIP Calculator
- Goal Planning: Determine exactly how much you need to save monthly to reach a specific financial target, such as retirement or a child's education.
- Informed Decisions: Compare different return scenarios to understand the impact of market volatility on your portfolio.
- Discipline: Seeing the potential future value of small savings encourages investors to stay committed to their long-term financial plan.
Formula Used
The calculator uses the following formula for Future Value of an Annuity (due):
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)