What is a SIP?
A Systematic Investment Plan (SIP) is a fixed amount invested in a mutual fund at a set interval — almost always monthly. Instead of timing the market with one lump sum, a SIP buys in gradually, at whatever price each month brings, which averages out the highs and lows over time (a habit usually called rupee-cost averaging).
The real force behind a SIP's growth isn't the monthly amount — it's time. Returns earned in year one start earning their own returns in year two, and so on; a SIP run for 20 years typically ends up dominated by growth on growth, not the money you actually put in.
How SIP returns are calculated
The maturity value of a SIP follows the future-value-of-an-annuity formula:
FV = P × [((1 + i)n − 1) ÷ i] × (1 + i)
- P — the monthly investment
- i — the expected monthly return (annual rate ÷ 12 ÷ 100)
- n — the number of instalments (years × 12)
The trailing (1 + i) accounts for each instalment being invested at the start of its month, which is how SIP debits are actually timed.
A word on "expected return"
Unlike a fixed deposit, a mutual fund's return is not promised by anyone. The rate you enter above is an assumption you're testing, not a guarantee — equity mutual funds have historically returned somewhere in the 10–14% range over long periods in India, but any single 10-year stretch can land well outside that, in either direction. Run the numbers at a rate you'd still be comfortable with if reality undershoots it.
Frequently asked questions
Is the SIP return guaranteed?
No. Mutual fund returns are market-linked and not guaranteed by anyone — the rate you enter is an assumption for planning, not a promise. Only government-backed instruments like PPF quote a fixed, notified rate.
Does a SIP calculator account for expense ratio or exit load?
This one doesn't — it shows gross growth at your assumed rate. A fund's expense ratio (charged continuously) and any exit load (charged on early withdrawal) would both reduce your actual net return slightly below what's shown here.
Why does starting a SIP early matter so much?
Because of compounding: money invested in year one has more years to earn returns on its own returns than money invested in year ten. Two SIPs of the same monthly amount and rate, started 10 years apart, can end with dramatically different maturity values — the earlier one usually wins by a wide margin.
Already running SIPs?
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