SIP Calculator: How It Works
A systematic investment plan puts a fixed amount into a fund at fixed intervals. Its power is not the amount but the discipline: each instalment compounds for a different length of time, and this calculator shows how much of your final total is money you contributed versus growth you did not have to work for.
The formula
Every instalment is its own small investment compounding for its own remaining term. Summed, that gives the future value of an annuity:
FV = P × [((1 + i)n − 1) ÷ i] × (1 + i)
P is the amount per instalment, i the periodic return (annual ÷ 12 for monthly) and n the number of instalments. The trailing (1 + i) applies when each instalment is invested at the start of the period, which is how most SIPs are structured.
A worked example
10,000 a month for 15 years at an assumed 12% annual return: i = 0.01, n = 180.
| Total invested | 18,00,000 |
|---|---|
| Estimated value | 50,45,760 |
| Growth | 32,45,760 |
| Growth as share of final value | 64% |
Duration beats contribution
The same 10,000 a month at 12%:
| Years | Invested | Value | Multiple |
|---|---|---|---|
| 5 | 6,00,000 | 8,24,860 | 1.4× |
| 10 | 12,00,000 | 23,23,910 | 1.9× |
| 15 | 18,00,000 | 50,45,760 | 2.8× |
| 20 | 24,00,000 | 99,91,480 | 4.2× |
| 25 | 30,00,000 | 1,89,76,350 | 6.3× |
Years 20 to 25 add 6,00,000 of contribution and roughly 90,00,000 of value. The last stretch of a long SIP does the heaviest lifting, which is why stopping early is far more damaging than starting small.
Rupee-cost averaging, honestly stated
A fixed amount buys more units when prices are low and fewer when they are high, so your average cost per unit ends below the average price over the period. This is a genuine benefit and it removes the need to time entry. What it does not do is protect you from loss — in a market that falls and stays down, averaging simply means you accumulated units at steadily lower prices, and your holding is still worth less than you put in. It manages entry risk, not market risk.
Step-up SIPs
Increasing the instalment annually in line with your income compounds the contribution as well as the return. Starting at 10,000 with a 10% annual step-up at 12% for 20 years produces roughly 1.6 crore against 99.9 lakh for a flat SIP — from contributions of about 68.7 lakh instead of 24 lakh. If your income rises and your SIP does not, inflation is quietly shrinking your real saving rate.
What the projection cannot know
The calculator assumes a constant return. Real equity returns arrive unevenly: a 12% long-run average may be −15% one year and +30% the next. Sequence matters too — poor returns late in a large portfolio hurt far more than poor returns early in a small one. Treat the output as one plausible path, not a forecast, and use a conservative rate for anything you are actually planning around.
Costs and tax
Expense ratios are charged annually on the whole balance and compound against you. A 1% difference in expense ratio over 20 years typically costs 15–20% of the final corpus. Taxation depends on the fund type, the holding period, and your jurisdiction, and it applies at redemption rather than along the way — so the figure above is pre-tax. Both are reasons to model with an after-cost return rather than a headline one.