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Understanding the Power of SIP (Systematic Investment Plan)

A Systematic Investment Plan (SIP) is a disciplined approach to wealth creation where you invest a fixed amount regularly in mutual funds or other investment vehicles. Unlike lump-sum investments, SIPs allow you to navigate market volatility through rupee-cost averaging and benefit significantly from the power of compounding.

How SIP Calculation Works

The SIP formula calculates the future value of your monthly contributions based on a compound interest rate. The mathematical formula used is:

FV = P × [((1 + i)n – 1) / i] × (1 + i)

  • P: Monthly investment amount
  • i: Monthly rate of interest (Annual rate / 12 / 100)
  • n: Total number of months (Years × 12)

Realistic Wealth Growth Examples

Monthly SIP Period Return Rate Est. Final Wealth
$100 10 Years 12% $23,234
$500 15 Years 15% $338,432
$1,000 20 Years 12% $999,148

Key Benefits of Starting an SIP Today

  1. Disciplined Saving: SIPs automate your savings, ensuring you prioritize investment before spending.
  2. Rupee Cost Averaging: You buy more units when prices are low and fewer when they are high, lowering the average cost per unit.
  3. Compounding Effect: Small amounts invested over long durations generate exponential growth.
  4. Convenience: You can start with as little as $50 or $100 per month.
function calculateSIP() { var p = parseFloat(document.getElementById('monthlyAmt').value); var annualRate = parseFloat(document.getElementById('annualRate').value); var years = parseFloat(document.getElementById('years').value); if (isNaN(p) || isNaN(annualRate) || isNaN(years) || p <= 0 || annualRate <= 0 || years <= 0) { alert("Please enter valid positive numbers for all fields."); return; } var i = annualRate / 12 / 100; var n = years * 12; // SIP Formula: M = P × ({[1 + i]^n – 1} / i) × (1 + i) var totalValue = p * ((Math.pow(1 + i, n) – 1) / i) * (1 + i); var totalInvested = p * n; var estimatedReturns = totalValue – totalInvested; document.getElementById('totalInvested').innerHTML = "$" + totalInvested.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('estReturns').innerHTML = "$" + estimatedReturns.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('totalValue').innerHTML = "$" + totalValue.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('results-area').style.display = 'block'; }

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