What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan (SIP) is a strategy where you invest a fixed amount of money at regular intervals—usually monthly—into a mutual fund, ETF, or stock portfolio. Our SIP Calculator estimates the future value of these consistent investments by applying the principles of compound interest.
If you are analyzing your budget to figure out how much you can afford to invest monthly, you might also find our Paycheck Calculator helpful for understanding your true net income.
Why SIPs Work
Investing small, consistent amounts is often far more effective than trying to "time the market" with a large lump sum. This method utilizes two key financial principles:
- Rupee/Dollar Cost Averaging: By investing the same amount every month, you naturally buy more shares when prices are low and fewer shares when prices are high. This averages out the cost of your investments over time.
- Compound Interest: The returns you earn begin to earn returns themselves. Over long periods (10+ years), the interest earned can drastically exceed your total invested capital.
The SIP Mathematical Formula
The calculator uses the future value of an annuity due formula, which assumes the investment is made at the beginning of each month:
M = P × [((1 + i)ⁿ - 1) / i] × (1 + i)
- M: Maturity amount (Total Value)
- P: Regular monthly investment amount
- n: Number of payments (months)
- i: Periodic interest rate (Annual Rate / 12 / 100)
Disclaimer: Mutual fund investments are subject to market risks. This calculator provides estimates based on an assumed uniform rate of return and does not guarantee actual performance.