SIP Calculator

What this calculator tells you

A systematic investment plan, or SIP, is a method of investing a fixed amount into a fund at regular intervals, usually monthly. Because the same sum is invested whatever the market level, you buy more units when prices are low and fewer when they are high. This calculator shows the projected value of a monthly SIP at an assumed annual return, along with the total you contributed and the growth.

The calculation is a projection, not a forecast. It shows the outcome of a steady return that is never achieved in practice, so use it to test a range of returns and to understand the power of regular saving.

How the projected value is worked out

The calculator converts the annual return into a monthly rate, and grows each monthly contribution from the month it is paid to the end of the term. Contributions made at the start of the month grow for one month longer than those made at the end, which the calculator allows for when you choose the start-of-month option. The total of all grown contributions is the projected value.

A worked example

Suppose you invest 500 a month for ten years at an assumed 12% a year. You contribute 60,000 in total. The projected value is about 115,019, so the growth is about 55,019. Because the return is an assumption, lower returns would reduce the result, and the difference grows with the length of the plan.

Why regular investing is a discipline

A monthly plan spreads the purchase price over time, which can reduce the risk of investing a large sum just before a fall. It also builds a habit of saving from income, and the habit often matters more than the choice of return. The growth at the end comes from both the contributions and the compounding on them, so starting early and staying consistent are the largest drivers of the result.

Limits of the calculation

The calculator assumes a constant return every month, which real funds do not deliver. Returns vary, and a sequence of poor years early in the plan has a larger effect than the same poor years later. Fund fees, platform charges and taxes on gains are not included unless you reduce the return to allow for them. Inflation reduces the buying power of the final value.

Staying invested through falls

The greatest risk to a regular plan is stopping after a fall in the market. Units bought during a fall are the ones that help the plan most when prices recover, so a plan that continues through poor years usually performs better than one that is paused. Decide in advance how you will respond to a fall.

Check the costs of the plan, such as any charge per instalment, because small fixed charges weigh more heavily on small monthly amounts. Compare the total cost with the value of the plan over the years you expect to hold it.

Using the result

Use the calculator to set a monthly amount that reaches a goal, and test a lower return to see whether the plan still works. Review the plan each year, and consider increasing the contribution when your income rises. Keep the investment for the length of time it needs, because short-term withdrawals can disrupt the compounding.