How SIP Returns Are Calculated
A SIP (systematic investment plan) invests a fixed amount every month. Here is the formula behind the result and a worked example.
The formula
For a monthly SIP, the estimated future value is:
FV = P x [((1 + i)^n - 1) / i] x (1 + i)
- P = amount invested each month
- i = monthly rate of return (annual rate divided by 12)
- n = number of monthly instalments
Worked example
Invest ₹5,000 a month for 10 years at an assumed 12% a year. Here P = 5,000, i = 0.01 and n = 120. The estimated maturity value is about ₹11.62 lakh, of which ₹6 lakh is your own investment and the rest is estimated gain. You can confirm this in the SIP Calculator.
What matters most
- Time. A longer period gives compounding more room to work.
- Amount. Raising the monthly amount raises the result in direct proportion.
- Rate. Small changes in the assumed return change the outcome a lot over long periods.
Remember
Market-linked returns are not guaranteed. The calculator shows an estimate from the rate you enter, not a promise. If you are comparing it with a loan, see how EMI is calculated.
Frequently asked questions
Is SIP return guaranteed?
No. Returns of market-linked investments change. The calculator gives an estimate based on the rate you enter.
Why divide the annual rate by 12?
Because instalments are monthly, the formula uses a monthly rate.
Does the calculator include tax?
No. It shows the pre-tax estimate. Taxes and charges depend on your investment and holding period.