SIP Calculator

Systematic Investment Plan, popularly known as SIP, has revolutionized how Indians invest in the stock market. Unlike the traditional approach of timing the market with a large lump sum, SIP allows you to invest small, fixed amounts at regular intervals into mutual funds.

Whether you are saving for a dream home, your child's higher education, or a comfortable retirement, a SIP acts as a powerful tool to build wealth over the long term. Our SIP Calculator helps you visualize this journey by estimating how much your small monthly investments can grow into a significant corpus over time.

What is a Systematic Investment Plan (SIP)?

A SIP is not a financial product itself; it is a mode of investment. Just like a Recurring Deposit (RD) where you deposit money monthly with a bank, a SIP allows you to invest a fixed sum monthly (or quarterly) in a Mutual Fund scheme.

The key benefits of SIP include:

• Financial Discipline: Automating your investments ensures you save before you spend.
• Rupee Cost Averaging: You buy more units when the market is down and fewer when it is up, averaging your cost per unit.
• Power of Compounding: Your returns generate further returns. For example, a monthly SIP of ₹10,000 at 12% returns can grow to ₹99 Lakhs in 20 years, whereas your total investment is only ₹24 Lakhs.

Who Should Use This SIP Calculator?

This tool is ideal for:

• Salaried Employees: Who can set aside a portion of their monthly salary for wealth creation.
• Students & Beginners: Who want to start investing with amounts as low as ₹500.
• Goal Planners: Anyone targeting a specific financial goal like buying a car or funding a wedding in 5-10 years.

SIP Calculation Formula

Our calculator uses the standard Future Value of Annuity formula to estimate your returns. The formula is:

Where:

• FV = Future Value (Maturity Amount)
• P = Monthly Investment Amount
• r = Monthly Rate of Return (Annual Rate / 12 / 100)
• n = Total number of months (Years × 12)

Example Calculation

Let’s take a practical example to understand how this works in the Indian context.

Scenario: Ms. Ananya, a 25-year-old software engineer, decides to start a SIP of ₹5,000 per month in an Equity Mutual Fund. She expects a conservative annual return of 12% and plans to stay invested for 15 years.

• Principal (P): ₹5,000
• Rate (r): 12% p.a. = 1% per month = 0.01
• Time (n): 15 years = 180 months

Using the formula:

Part 1: (1 + 0.01)^180 = 5.9958
Part 2: (5.9958 - 1) / 0.01 = 499.58
Part 3: 499.58 × (1 + 0.01) = 504.57
Final Calculation: ₹5,000 × 504.57 = ₹25,22,880

So, Ananya invests a total of ₹9 Lakhs (5000 × 180), and her wealth grows to approximately ₹25.2 Lakhs. That is a profit of over ₹16 Lakhs!

Common SIP Mistakes to Avoid

While investing is simple, avoid these common pitfalls:

1. Stopping during market crashes: This is the worst mistake. When the market is down, you get more units for the same money. Stopping defeats the purpose of averaging.
2. Checking daily value: SIP is for the long term (5-10 years). Daily fluctuations are noise.
3. Not increasing SIP amount: As your income grows (increments, bonuses), your SIP amount should also increase (“Top-up SIP”) to beat inflation effectively.

Frequently Asked Questions (FAQs)