SIP Calculator
Invested Amount: ₹0
Est. Returns: ₹0
Total Value: ₹0
Concept:
SIP is based on the Future Value of an Ordinary Annuity with monthly compounding. Each monthly investment grows at a different rate, so we use the annuity formula.
SIP is based on the Future Value of an Ordinary Annuity with monthly compounding. Each monthly investment grows at a different rate, so we use the annuity formula.
Main Formula
FV = P * (((1 + r)^n – 1) / r) * (1 + r)
FV = P * (((1 + r)^n – 1) / r) * (1 + r)
Where:
- FV = Future Value
- P = Monthly SIP amount
- r = Monthly rate of return (Annual return / 12 / 100)
- n = Number of months
Step-by-Step Manual Formulas
- Convert annual return to monthly rate: r = (Annual Return) / (12 * 100)
- Calculate growth factor: Growth_Factor = (1 + r)^n
- Subtract 1: Step_A = Growth_Factor – 1
- Divide by monthly rate: Step_B = Step_A / r
- Multiply by monthly SIP amount: Step_C = P * Step_B
- Add last month’s interest: FV = Step_C * (1 + r)
Theory in Simple Words
- Each SIP installment earns returns for a different duration.
- The fraction ((1 + r)^n – 1) / r adjusts for this effect.
- The final multiplier (1 + r) ensures the last SIP also earns one month of return.