SIP Calculator (Systematic Investment Plan)
Understanding Your SIP Investment Journey
A Systematic Investment Plan (SIP) is a disciplined way of investing in mutual funds. It allows you to invest a fixed amount regularly (monthly, quarterly, or bi-annually) rather than making a one-time lump sum payment. This calculator helps you estimate the future value of your regular investments based on a projected annual growth rate.
The Power of Compounding
SIPs leverage the power of compounding. When you invest regularly, your returns are reinvested, generating their own returns over time. The longer you stay invested, the more pronounced the compounding effect becomes. This is why even small monthly contributions can grow into a significant corpus over 15 to 20 years.
Key Benefits of SIP
- 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.
- Financial Discipline: Automating your investments ensures you stay committed to your long-term financial goals.
- Accessibility: You don't need a large sum of money to start. Many plans allow investments as low as $50 per month.
- Flexibility: You can increase, decrease, or stop your SIP at any time depending on your financial situation.
Realistic Example:
If you invest $300 every month for 15 years at an expected return of 12% per annum:
- Total Invested: $54,000
- Wealth Gained: $97,372
- Total Maturity Value: $151,372
How to use the SIP Calculator?
Using our tool is straightforward. Enter your monthly contribution, the interest rate you expect from your mutual fund or equity portfolio, and the number of years you plan to stay invested. The calculator uses the formula for "Future Value of an Annuity Due" to provide precise estimates.
Formula used: FV = P × [((1 + i)n – 1) / i] × (1 + i)
Where: P is the monthly amount, i is the monthly interest rate, and n is the number of months.