SIP Calculator

A systematic investment plan is an instruction to move a fixed amount into a mutual fund on the same date every month. What makes the result hard to guess is that it is not one investment growing — it is a new investment every month, each one growing only from the month it was actually paid.

The first instalment of a fifteen-year plan compounds for a hundred and eighty months. The last one compounds for one. The final value is the sum of a hundred and eighty different growth periods, which is why the gap between what you put in and what comes out is so much larger than the headline rate makes it sound.

This calculator simulates every instalment rather than applying a single formula to a lump sum, so the totals, the step-up and the year-by-year table all come from the same arithmetic and agree with each other.

Each instalment is treated as its own small investment. The month it is paid, it joins the balance; from then on the whole balance grows at one twelfth of the annual rate, month after month, until the end of the term. The tool walks through every month in order and applies exactly that.

With a constant instalment the walk reproduces the standard annuity-due formula, FV = P x ((1 + i)^n - 1) / i x (1 + i), where i is the monthly rate and n the number of instalments — the instalment is treated as paid at the start of the month, which is what fund houses do. Simulating anyway is what makes the rest possible: the moment a step-up changes the instalment partway through, no single formula describes the plan, and a table derived from one would not add up to its own total.

What the simulation deliberately does not model: expense ratio, exit load, dividend distribution tax or capital gains tax. Those reduce a real return by a meaningful amount. Treat the figure here as the gross arithmetic of compounding, and subtract your fund's costs from the rate you enter if you want something closer to the net.

A step-up raises the instalment by a fixed percentage at each anniversary — ten per cent a year turns 10,000 a month into 11,000 in year two, 12,100 in year three, and so on. It is meant to track a salary that rises, so the plan does not quietly shrink in real terms while your income grows.

The effect is larger than it looks because every increase then compounds for the rest of the term. The extra 1,000 a month in year two is not worth 12,000 at the end; it is worth 12,000 grown for thirteen more years. Over a long plan, a modest step-up routinely adds more to the final value than a couple of percentage points on the return rate would.

The year table shows the instalment for each year when a step-up is set, so it is clear what the plan is actually asking of you in year twelve before you commit to it.

For the same total amount, a lump sum invested at the start beats a SIP under a constantly rising market, simply because all of the money compounds for the whole term rather than trickling in. That comparison is a hindsight argument: it assumes you had the whole sum available and that the market went up from the day you invested it.

What a SIP does is remove the decision. Buying on a fixed date every month means buying more units when prices are low and fewer when they are high, and it takes the timing question — the one almost nobody gets right twice — out of the process entirely. For money that arrives as monthly income rather than as a windfall, it is also the only option that exists.

Set the expected return to zero for a moment. The figure that remains is the only part of the projection that is certain; everything above it is the rate assumption doing the work.

Long-run Indian equity index returns have historically landed in the low teens before costs, but the average conceals the shape: individual years range from strongly negative to well above thirty per cent, and a SIP that ends during a bad stretch gets the bad stretch. Debt funds sit far lower with far less spread.

The practical use of this calculator is not the single number it produces. Run the plan at twelve per cent, then at eight, then at fifteen, and look at the range. If your goal only works at the top of that range, the plan needs more money or more time rather than a more optimistic assumption.