Understanding Your SIP and Investment Planning
Our SIP Calculator helps you estimate the potential returns on your Systematic Investment Plan and achieve your financial goals.
What is SIP?
SIP stands for Systematic Investment Plan. It is a method of investing a fixed amount regularly (e.g., monthly, quarterly) into a mutual fund scheme. SIPs are popular because they allow investors to benefit from rupee cost averaging and power of compounding.
Investing through SIP helps in disciplined investing and can yield significant returns over the long term, even with small regular contributions.
How SIP is Calculated
The SIP maturity amount depends on three main factors:
-
Monthly Investment (P)The fixed amount you invest periodically.
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Expected Annual Return (i)The anticipated annual rate of return on your investment. For calculation, this is converted to a monthly rate.
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Investment Period (n)The total duration in months for which you plan to invest.
The formula used is:
$$FV = P \times \frac{((1 + i)^n - 1)}{i} \times (1 + i)$$
Where:
- $FV$ = Future Value (Maturity Amount)
- $P$ = Monthly Investment Amount
- $i$ = Monthly Expected Rate of Return (Annual Rate / 12 / 100)
- $n$ = Investment Period in Months (Years * 12)
Understanding the Growth Projection
The year-wise growth projection table provides a detailed view of how your investment grows over time. It shows the cumulative investment, the returns earned each year, and the total maturity value at the end of each year.
This projection helps you visualize the power of compounding and how your wealth accumulates over the chosen investment period.