How it works
A SIP (systematic investment plan) invests a fixed amount every month. Each instalment earns returns for the months it stays invested, and those returns earn returns of their own. That compounding is why the gap between what you invest and what you end up with widens in the later years.
The result is an estimate based on the return you type in. Real returns change from year to year and are not guaranteed, so it is sensible to try a few different rates, including low ones.
The formula
Future value = P × [((1 + i)^n − 1) ÷ i] × (1 + i)
P is the monthly amount, i is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of months. Each instalment is assumed to be invested at the start of the month. For a lumpsum: amount × (1 + annual rate)^years.
A worked example
Investing ₹10,000 a month for 10 years at an expected 12% a year means you put in ₹12,00,000. The estimated value is about ₹23,23,391, so the estimated returns are about ₹11,23,391.
Frequently asked questions
Are SIP returns guaranteed?
No. Mutual fund returns go up and down with the market, and past returns do not promise future ones. The figure here is only what the rate you entered would produce if it held every year.
Which return rate should I use?
There is no right answer. Use a rate you consider realistic for the type of fund, and compare a cautious figure with an optimistic one before deciding anything.
Does this include tax, exit load or expense ratio?
No. Taxes on gains, exit load and fund expenses reduce what you actually receive. Check the current rules for your type of fund.
Why does my fund app show a different number?
Apps may use XIRR or CAGR on actual instalment dates, and funds credit units on specific days. A simple monthly-compounding estimate like this one will differ slightly.