A SIP (systematic investment plan) invests a fixed amount in a mutual fund every month. It is popular because it is simple, it builds a habit and it does not need you to guess the right day to invest. This guide explains the maths behind the numbers you see in a SIP calculator, and where those numbers stop being reliable.
The SIP maturity formula
FV = P × ((1 + i)ⁿ − 1) ÷ i × (1 + i) P = monthly amount i = expected yearly return ÷ 12 ÷ 100 n = number of months
The last factor, (1 + i), assumes each instalment is invested at the start of the month. Every instalment then compounds for a different length of time: the first for all n months, the last for just one.
Example: ₹5,000 a month at 12%
| Period | You invest | Value at 12% a year | Gain |
|---|---|---|---|
| 10 years | ₹6,00,000 | ≈ ₹11,61,695 | ≈ ₹5,61,695 |
| 20 years | ₹12,00,000 | ≈ ₹49,95,740 | ≈ ₹37,95,740 |
The second decade adds far more than the first. Doubling the time from 10 to 20 years makes the investment about four times larger at the same rate, because returns start earning returns. That is why starting early matters more than starting big.
Try your own amount, return and period, with step-up and lumpsum options.Open SIP Calculator →Rupee-cost averaging
When the market is down, your fixed amount buys more units; when it is up, fewer. Over time the average cost per unit is lower than the average price. It does not guarantee profit, but it removes the pressure of timing the market.
What a step-up SIP does
A step-up SIP raises your monthly amount every year, by a percentage (say 10%) or by a fixed amount. If your income grows, a step-up lets your investment grow with it and can reach a goal years sooner than a flat SIP. The calculator compares both side by side.
What no calculator can tell you
- The real return. A fixed 12% is an assumption. Actual returns swing year to year. Try a low case (say 8%) and a high case to see a range.
- Inflation. ₹50 lakh in 20 years buys much less than ₹50 lakh today.
- Costs and tax. Expense ratios and capital gains tax reduce what you keep.
For fixed deposits and recurring deposits, where the rate is known in advance, use the FD & RD Calculator.
Frequently asked questions
Is SIP better than a lumpsum?
Neither is always better. A lumpsum invested early in a rising market wins; a SIP is steadier when you invest from monthly income or when markets are volatile. Many people use a SIP for regular income and a lumpsum when they receive a bonus.
Can I stop a SIP any time?
Open-ended mutual fund SIPs can usually be paused or stopped without penalty, though some funds charge an exit load on units sold early.