SIP is one of the most sought-after investment methods among all types of investors.
SIP is often understood to be a synonym for mutual funds. However, a systematic investment plan is a method that helps investors like you understand how much return you can expect from a mutual fund upon investing a certain amount on a monthly basis. With SIPs, you can leverage rupee cost averaging and compounding to grow your wealth over time.
But how do you estimate the potential growth of your investments?
An SIP calculator helps you predict the future value of your investments based on key inputs like monthly contributions, investment tenure, and expected return rates.
An SIP calculator is a smart tool that provides instant return projections on the basis of your inputs.
Some of the key features of our SIP calculator are:
SIPs leverage the phenomena of compounding to calculate the potential future value of your investments in mutual funds.
Here is the formula used by the calculator:
Future Value (FV) = P × [(1 + r)^n - 1] × (1 + r) ÷ r
Wherein,
P = Principal amount
r = Monthly rate of return (annual return/12)
n = Total number of monthly installments
Even though the formula is pretty straightforward, let’s gain a better understanding with an example.
Say, you start investing ₹10,000 in mutual funds every month for 10 years and you are expecting 12% annual returns on your investments.
Using the formula,
FV = ₹10,000 × [(1 + 0.01)^120 - 1] × (1 + 0.01) ÷ 0.01
Future Value (FV) ≈ ₹23,23,391
Your cumulative invested amount is ₹12,00,000, and your estimated returns are ₹11,23,391 and your total investment corpus will be ₹23,23,391 at the end of 10 years.
SIP investments work on compounding, which means that in the early stages, your contributions make up most of the accumulated amount. But, as the years pass, compounding multiplies your portfolio’s growth exponentially and provides profitable returns.
Here’s a glimpse of how your wealth builds over time with SIP:
| Year | Total Contributions | Returns Generated | Total Value |
|---|---|---|---|
| 1 | ₹1,20,000 | ₹6,682 | ₹1,26,682 |
| 5 | ₹6,00,000 | ₹1,44,641 | ₹7,44,641 |
| 10 | ₹12,00,000 | ₹11,23,391 | ₹23,23,391 |
Apart from making the process stress-free and much quicker, our SIP Calculator offers a range of benefits you can enjoy.
You can start investing in SIPs with as little as ₹100 a month, but most funds require at least ₹500 to be invested in them. If you are starting out, begin by investing anywhere between ₹500 and ₹5,000 each month, based on your convenience.
The tenure you choose for your SIP investment differs based on your situation, goals, financial capacity, and the return you expect. There is no maximum tenure, but you might need to lock your funds for a minimum of 3 years in mutual funds.
You can choose to update your existing SIP but that would be applicable on all future SIP investment amounts. Alternatively, you can choose to use top-up or step-up features that allows you to increase your amount at regular intervals (e.g., annually).
SIP returns are not guaranteed; they depend on market conditions and the performance of the mutual fund you invest in. Jiraaf's SIP Calculator provides estimates based on assumed returns, but your actual returns may vary over time.
The rate of return varies based on the type of mutual fund you invest in. Typically, equity mutual funds offer an average annual return of 8-15%, while bonds or debt funds may return around 6-10%. For accurate projections, Jiraaf's SIP Calculator allows you to input the rate of return that fits your chosen investment type.