How SIP returns are calculated
A SIP (Systematic Investment Plan) invests a fixed amount at a fixed interval, usually monthly. Because each instalment is invested on a different date, each one compounds for a different length of time — the first instalment grows for the full tenure, the last for barely a month.
The maturity value is therefore the sum of every instalment's individual growth, which the formula below expresses in closed form. The result is highly sensitive to time: the final years contribute far more than the first, because compounding acts on a much larger base.
Worked example
5,000 invested monthly for 10 years at an assumed 12% annual return. The monthly rate is 0.12 / 12 = 0.01 across 120 instalments.
| Input | Value |
|---|
| Monthly investment (P) | 5,000 |
| Assumed annual return | 12% |
| Duration | 10 years (120 instalments) |
| Total invested | 6,00,000 |
| Maturity value | 11,61,695 |
| Wealth gained | 5,61,695 |
Nearly half the final corpus is growth rather than contribution. Run the same SIP for 20 years instead of 10 and the maturity value reaches roughly 49,95,700 on 12,00,000 invested — doubling the duration multiplies the corpus more than four times.
How to use this calculator
- Enter the amount you can invest every month without interruption.
- Set the duration in years — treat anything under five years as short.
- Enter an expected annual return. Be conservative rather than optimistic.
- Compare the total invested against the maturity value to see the compounding contribution.
- Re-run with a longer duration to see how much time alone contributes.
Frequently asked questions
What return should I assume for a SIP?
There is no guaranteed figure — equity fund returns vary year to year and can be negative over short periods. Many investors model a conservative long-run assumption and treat anything above it as upside. Past performance does not predict future returns.
Is a SIP better than a lumpsum investment?
They solve different problems. A SIP spreads purchases across market levels, which averages your entry price and removes timing pressure. A lumpsum puts the full amount to work immediately, which wins when markets rise steadily but hurts if you invest just before a decline.
What is rupee cost averaging?
A fixed monthly amount buys more units when prices are low and fewer when prices are high. Over many instalments this pulls your average purchase price below the average market price, without requiring you to predict anything.
What happens if I stop a SIP midway?
Contributions stop but units already bought stay invested and continue to grow or fall with the market. Most funds allow you to pause or restart without penalty, though stopping early forfeits the compounding the remaining years would have added.
Does a step-up SIP make a large difference?
Yes, and more than most people expect. Raising the monthly amount by even a modest percentage each year — roughly in line with salary growth — compounds alongside the returns and can substantially increase the final corpus.
Are SIP returns guaranteed?
No. A SIP is a way of investing, not a product with an assured rate. Returns depend entirely on the underlying fund's performance, and market-linked investments can lose value.
This calculator is an educational tool. Results are estimates based on the inputs you provide and do not constitute financial advice. Verify figures with your bank, broker or a qualified advisor before acting on them.