A Systematic Investment Plan (SIP) is a disciplined and convenient method of investing in mutual funds. It allows you to invest a fixed amount of money at regular intervals (usually monthly) into a chosen mutual fund scheme. This approach helps in rupee cost averaging, thereby reducing the risk associated with market volatility and building wealth over the long term.
How the SIP Calculator Works
The SIP calculator uses the concept of Future Value of an Ordinary Annuity to estimate the maturity amount. The formula considers your regular investment, the expected rate of return, and the duration of your investment.
The formula used is:
FV = P * [((1 + r)^n - 1) / r] * (1 + r)
Where:
FV = Future Value (Maturity Amount)
P = Periodic Investment (Monthly Investment Amount)
r = Periodic Interest Rate (Monthly Rate of Return)
n = Number of Periods (Total number of months)
To get the monthly rate of return (r), the annual rate is divided by 12. To get the total number of periods (n), the investment period in years is multiplied by 12.
Example Calculation:
Let's say you invest ₹5,000 per month for 10 years with an expected annual return of 12%:
Monthly Investment (P) = ₹5,000
Annual Interest Rate = 12%
Monthly Interest Rate (r) = 12% / 12 = 1% or 0.01
Investment Period = 10 years
Number of Periods (n) = 10 years * 12 months/year = 120 months
Total Amount Invested = Monthly Investment * Number of Months = ₹5,000 * 120 = ₹6,00,000
Total Returns = Maturity Amount – Total Amount Invested = ₹11,61,795 – ₹6,00,000 = ₹5,61,795
Benefits of SIP
Disciplined Investing: Encourages regular saving and investing.
Rupee Cost Averaging: Invests a fixed amount, buying more units when prices are low and fewer when prices are high, averaging out the purchase cost.
Power of Compounding: Early and regular investments benefit significantly from the compounding effect over the long term.
Flexibility: You can start with small amounts and increase them as your income grows.
Risk Mitigation: Spreads investment over time, reducing the impact of short-term market volatility.
function calculateSIP() {
var monthlyInvestment = parseFloat(document.getElementById("monthlyInvestment").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var investmentPeriod = parseFloat(document.getElementById("investmentPeriod").value);
var errorMessageElement = document.getElementById("error-message");
var resultSection = document.getElementById("result-section");
// Clear previous error messages and results
errorMessageElement.textContent = "";
resultSection.style.display = "none";
// Input validation
if (isNaN(monthlyInvestment) || monthlyInvestment <= 0) {
errorMessageElement.textContent = "Please enter a valid positive monthly investment amount.";
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
errorMessageElement.textContent = "Please enter a valid annual rate of return (can be 0 or positive).";
return;
}
if (isNaN(investmentPeriod) || investmentPeriod 0) {
// Future Value of an Ordinary Annuity formula
maturityAmount = monthlyInvestment * (Math.pow(1 + monthlyRate, numberOfMonths) – 1) / monthlyRate;
} else {
// If rate is 0%, maturity is just the sum of investments
maturityAmount = monthlyInvestment * numberOfMonths;
}
var totalInvested = monthlyInvestment * numberOfMonths;
var totalReturns = maturityAmount – totalInvested;
// Format results as currency
var formatter = new Intl.NumberFormat('en-IN', {
style: 'currency',
currency: 'INR', // Default currency, can be changed if needed
minimumFractionDigits: 0,
maximumFractionDigits: 0
});
document.getElementById("totalInvested").textContent = formatter.format(totalInvested);
document.getElementById("totalReturns").textContent = formatter.format(totalReturns);
document.getElementById("maturityAmount").textContent = formatter.format(maturityAmount);
resultSection.style.display = "block";
}