SIP Calculator – Calculate SIP Returns

What is SIP Calculator – Calculate SIP Returns?

A SIP (Systematic Investment Plan) Calculator is a tool used to estimate the returns on investments made through a systematic investment plan. SIPs allow investors to invest a fixed amount regularly in mutual funds, providing a disciplined approach to building wealth over time.

Investment Amount (Monthly Contribution):

• The investment amount is the fixed sum of money invested regularly (usually monthly) through the SIP.
• This amount is consistently invested over the investment period.

Rate of Return:

• The rate of return is the expected annual percentage return on the mutual fund investment.
• It reflects the growth of the investment over time.

Investment Period:

• The investment period is the total duration for which the SIP contributions will be made.
• It is usually measured in years.

Compounding Frequency:

• Compounding refers to how often the returns are calculated and added to the investment.
• For SIPs, returns are generally compounded monthly or annually.

SIP Returns Formula:

• The formula to calculate the future value of an SIP investment is:
  FV = P × [(1 + r)^nt - 1] / r × (1 + r)
• Where:
  FV = future value of the investment
  P = monthly investment amount
  r = monthly rate of return (annual rate of return divided by 12)
  n = number of years
  t = number of months per year (usually 12)

Example Calculation:

• If you invest ₹200 monthly at an expected annual return rate of 12% for 10 years, the future value of the SIP would be calculated as:
  r = 0.12 / 12 = 0.01
FV = 200 × [(1 + 0.01)^(12*10) - 1] / 0.01 × (1 + 0.01) = ₹42,600.16