How a SIP builds wealth
A systematic investment plan (SIP) invests a fixed amount every month into a mutual fund or index fund. Two forces drive its growth: compounding, where returns earn further returns over time, and rupee- or dollar-cost averaging, where a fixed monthly amount buys more units when prices are low and fewer when they are high. This calculator uses the standard SIP formula, treating each contribution as invested at the start of the month, to project a maturity value from your monthly amount, expected return and time horizon. The longer you stay invested, the more the returns outpace the amount you put in.
Why time matters more than amount
Because a SIP compounds, the early years lay the foundation and the later years deliver the largest gains — the growth curve bends sharply upward toward the end. Starting five years earlier often beats investing a larger sum later. The 'estimated returns' line shows how much of your maturity value came from market growth rather than your own contributions; over long horizons it commonly exceeds the total invested. This is the mathematical case for starting a SIP as early as possible and continuing through market ups and downs rather than trying to time entries.
Choosing a realistic return rate
The maturity value is only as good as the return you assume. Equity funds have historically delivered double-digit annual returns over long periods, but real returns vary year to year and are never guaranteed — markets fall as well as rise. Use a conservative rate for a sober projection and a higher rate to see the optimistic case, then plan around the lower number. Debt and hybrid funds typically return less than equity but with lower volatility, so match your assumed rate to the kind of fund you actually intend to invest in.
Returns, costs and tax
This projection shows gross growth at a steady rate. Real SIPs carry an expense ratio that the fund deducts, and gains may be subject to capital-gains tax depending on the fund type, holding period and your country. Actual returns will also be lumpy rather than smooth, since markets do not rise in a straight line. Treat the maturity figure as a planning estimate of the long-run average, not a promise, and revisit it as your contributions or goals change. These calculators use standard financial formulas and the figures you enter. Real interest rates, lender fees and tax treatment vary by bank and country, so treat the results as planning estimates and confirm exact numbers with your lender or a qualified adviser before committing.
Frequently asked questions
What is a SIP?
A systematic investment plan invests a fixed amount at regular intervals — usually monthly — into a mutual fund. It spreads your investment over time and harnesses compounding and cost averaging.
How is SIP maturity value calculated?
It uses the future value of a monthly annuity: each contribution grows at the expected monthly return until the end of the term. This calculator assumes contributions at the start of each month, the common SIP convention.
Are SIP returns guaranteed?
No. SIPs invest in market-linked funds, so returns vary and can be negative in the short term. The expected return you enter is an assumption, not a promise; use a conservative figure for planning.
Does this account for fund fees and tax?
No — it shows gross returns. Real funds charge an expense ratio and gains may be taxed depending on the fund and holding period, so your net maturity value will be somewhat lower.