Systematic Investment Plan (SIP) Wealth Calculator
How to Calculate
- Enter Monthly Contribution ($): Specify the cash allocation deposited every month (e.g., $500).
- Enter Expected Annualized Return (%): Input the projected annual compounding rate based on historical asset class benchmarks (e.g., 10% to 12% for diversified equities).
- Enter Investment Horizon (Years): Input the total planned accumulation period.
- Review Wealth Projection: The engine divides your terminal corpus into actual out-of-pocket capital deposited vs. total capital appreciation earned.
Formula Reference
$M = P \times \left[ \frac{(1 + i)^n - 1}{i} \right] \times (1 + i)$
The SIP formula calculates the future value of an annuity due, where deposits are made at the beginning of each monthly compounding period:
- $M$: Projected terminal wealth maturity value.
- $P$: Monthly capital contribution.
- $i$: Periodic monthly interest rate ($r / 12 / 100$).
- $n$: Cumulative number of monthly deposits ($15\text{ years} = 180\text{ deposits}$).
Practical Example
Worked Compounding Example
Projecting the terminal corpus of a $500 monthly investment at 12% annualized return over a 15-year horizon:
- Cumulative Capital Deposited: $180 \times \$500 = \mathbf{\$90,000.00}$.
- Periodic Monthly Rate ($i$): $0.12 / 12 = 0.01$.
- Future Value Annuity Factor: $\left[ \frac{(1.01)^{180} - 1}{0.01} \right] \times 1.01 \approx 504.576$.
- Final Maturity Value ($M$): $\$500 \times 504.576 = \mathbf{\$252,288.00}$.
- Pure Compound Capital Gain: $\$252,288.00 - \$90,000.00 = \mathbf{\$162,288.00}$.
Frequently Asked Questions
What is rupee-cost / dollar-cost averaging in a SIP?
Dollar-cost averaging occurs when you invest a fixed cash amount on a set date each month regardless of market fluctuations. When asset prices dip, your fixed payment buys more fund units; when prices rise, it buys fewer units, lowering your average cost per unit over time without requiring you to time the market.
Can I pause or alter my monthly SIP contributions?
Yes. Unlike contractual debt payments, mutual fund and index SIPs offer complete liquidity. Investors can increase, decrease, pause, or liquidate their systematic investment plans without paying penalty fees in most standard open-ended mutual funds.