The formula used in SIP calculations follows the compound interest principle: Where:

FV = Future Value of Investment

P = Monthly Investment Amount

r = Expected Return Rate per month (Annual rate/12)

n = Number of months

Let’s say you are a salaried professional with a steady monthly income and plan to invest ₹5,000 per month in a Systematic Investment Plan (SIP). After careful research, you select an SIP offering an average annual return of 12%. Now, if you want to calculate the final maturity amount after 5 years, follow these steps:

Scenario 1: Estimating Final SIP Returns
Open the SIP calculator and select the “Investment Amount” tab.
Enter ₹5,000 in the “Investment Amount” field.
Set the expected return rate to 12% per annum.
Input the investment duration as 5 years.

🔹 According to the SIP calculator, if you invest ₹5,000 every month for 5 years at a 12% annual return, your final amount will be approximately ₹4,12,432, while your total invested amount will be ₹3,00,000.

👉 If this amount doesn’t meet your expectations, you can either increase the investment period or choose a mutual fund with higher returns.

Scenario 2: Finding the Required SIP Amount for a Goal

Now, assume Mr. A wants to purchase a car worth ₹5,00,000 in 2 years. He selects an SIP that historically provides 12% annual returns. Here’s how he can determine the monthly SIP contribution needed:

Open the SIP calculator and select the “Target Amount” tab.
Enter the goal amount as ₹5,00,000.
Set the investment period to 2 years.
Input the expected annual return rate of 12%.

🔹 The SIP investment calculator will estimate that Mr. A needs to invest ₹18,353 per month to accumulate ₹5,00,000 in 2 years.

By using an SIP calculator, investors can make well-informed decisions about their financial goals, ensuring a disciplined and structured approach to wealth creation.