How SIP returns are calculated
Each monthly installment grows independently from the day it is invested. The first installment compounds for the full period, the last for barely a month. The future value formula sums all of them: FV = M × [((1+i)^n − 1) / i] × (1+i), where M is the monthly amount, i the monthly return, and n the number of months.
The projection assumes a constant return, which real markets never deliver. Actual returns arrive unevenly, and the final value depends on the sequence. Treat the result as a planning estimate, not a promise.
Why the last years matter most
Investing 500 a month at 12% for 15 years means contributing 90,000, but the projected value is around 250,000. Nearly two thirds of the outcome is growth, and most of that growth happens in the final third of the period, when the accumulated balance is largest. Stopping early forfeits the steepest part of the curve.
Choosing a realistic return rate
Long-run equity index returns have historically averaged 10 to 12% per year in India and about 7 to 10% in developed markets, before inflation. Bond funds and deposits return less. Using a conservative rate and being pleasantly surprised beats planning around a best case.
Frequently asked questions
Is SIP the same as dollar-cost averaging?
Yes. SIP is the term used in India for investing a fixed sum at fixed intervals; dollar-cost averaging is the same strategy named for dollars. The math and the benefits are identical.
Are the projected returns guaranteed?
No. The calculator applies a constant assumed return. Market investments fluctuate, and real outcomes will differ. Use conservative assumptions for planning.
What return rate should I assume?
A common planning range is 10 to 12% for equity funds in India, 7 to 10% for global developed-market equities, and 5 to 7% for conservative hybrid or debt funds. Lower is safer for planning.
Does the calculator account for inflation?
No, results are in nominal terms. To think in today's purchasing power, subtract expected inflation from your return assumption, for example use 7% instead of 12% if you expect 5% inflation.
What about step-up SIPs?
A step-up SIP increases your monthly amount every year, typically alongside salary growth, and can dramatically raise the final corpus. A dedicated step-up calculator is on our roadmap.
Is it better to invest monthly or as a lump sum?
Mathematically a lump sum invested earlier has more time in the market and usually wins. Practically, most people invest from monthly income, and SIP's discipline and risk-spreading make it the sustainable choice.