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SIP Calculator: Returns from systematic investment plans

Calculate the expected returns from a monthly systematic investment plan (SIP) at the end of the investment time period. An SIP invested is usually associated with mutual funds and payment can take place on the first or last day of the monthly cycle and affects the value at maturity. This calculator estimates the future value for both cases. 

How to use this calculator

  1. Enter your monthly investment amount (i.e. how much do you want to invest per month)

  2. Enter your SIP duration by entering the number of months (or years)

  3. Enter your expected yearly growth rate

  4. This calculator simplifies the monthly growth rate to (r/n). However, technically, the monthly compounding would be ((1+yearly growth rate)^(1/12)) -1

What is an SIP?

An SIP stands for "systematic investment plan". An SIP, or systematic investment plan, refers to the process of regularly investing an amount of money in pre-determined time intervals, e.g. a person invests ₹20,000 every month into a mutual fund for 5 years. The process is usually automated (direct debits from bank account) but a person could also manually do a series of "lumpsum investments" at fixed periods of time. The advantage of an SIP is that it encourages disciplined (regular) investing, it is (usually) automated, and it could help in price averaging over time, and offers a chance to compound returns.

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How is the future value of an SIP estimated?

There are two formulas that can be used to estimate the future value or expected returns of an SIP depending on whether the payments are made at the end or the beginning of a payment period. These formulas, along with an explanation of the  terms are provided above. Note: The formulas use the term "r/n" in some places. In my view, this a simplification to estimate the monthly growth rate based off the yearly growth rate. Over large periods of time and larger amount this would be noticeable. In a future iteration of this website, I may choose to provide the option for a more accurate calculation.

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What value does a monthly SIP of ₹ 50,000 become in 5 or more years?

Assuming a monthly investment of ₹50,000 and a growth rate of 10%, here are some outcomes, i.e. future values of a systematic investment plan for different periods of time:

  1. 5 years: ₹38,71,854 (profit: ₹8,71,854)

  2. 10 years: ₹1,02,42,249 (profit: ₹42,42,249)

  3. 15 years: ₹2,07,23,518 (profit: ₹1,17,23,518)

  4. 20 years: ₹3,79,68,442 (profit: ₹2,59,68,442)

  5. 30 years: ₹11,30,24,397 (profit: ₹9,50,24,397)

  6. 40 years: ₹31,62,03,980 (profit: ₹29,22,03,980)

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What does this calculator do?

This calculator helps you identify the returns from a monthly SIP investment, i.e. what value a series of monthly payments would grow to over time for an assumed yearly growth rate. This makes it possible to understand the the potential profit from a monthly SIP. While calculating the required future value, we implicitly assume a constant growth rate or cumulative average growth rate (CAGR). However, practically speaking, the growth rate in the real world is not uniform and may fluctuate over time. Depending on market conditions, this growth rate may also be positive (you make money), 0 (you neither make nor lose money) or negative (you lose money).

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It is actually impossible to accurately predict the value of an SIP investment as this depends on the growth rate, when growth is positive, negative or 0, and for how long that growth rate applies. However, for investment planning purposes and to get an idea of the expected return on the investment, the value can be estimated with the help of a calculator under some assumptions.

 

Note: This calculator does not consider applicable taxes, the expense ratio, exit load etc.
 

Why is this SIP calculator special?

This SIP investment calculator is special because it is very easy to use and is available online on a website that also hosts a whole bunch of other financial and investment related calculators which will make it easier for you to calculate whatever you need. It also shows you the estimated future value of the SIP investment assuming either payments at the beginning or end of the period. (see formulas above) For small SIPs or for small durations, the difference due to payments at the start or end of a period are close to negligible. However, as the SIP amount increases and/or the duration increases, these differences become more pronounced.  

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Why is a SIP calculator useful?

This online SIP investment calculator is useful as it can help with retirement planning, wealth planning, monthly budgeting, or investment planning. Since it calculates the target SIP value, it is a good way for beginners and professionals alike to detemine the required SIP investment amount, estimate the profits as well as future value. Lastly, one can get a feel of the effects of compounding and make better decisions.

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How do I use this SIP calculator?

Instructions to use this calculator are provided above.

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