What is an SIP (Systematic Investment Plan)?

A Systematic Investment Plan is a simple habit: you invest a fixed amount on a regular schedule (usually monthly) into an investment such as a mutual fund, index fund, or brokerage account. Instead of trying to time the market, SIP investing focuses on consistency — which can reduce decision stress and help you build wealth over long horizons.

SIPs are popular because they combine two powerful ideas: (1) recurring contributions and (2) compounding. Each month you add more principal, and any growth you earn can also start earning growth. Over time, the gains can become larger than the new money you add — that’s when compounding feels like it “kicks in.”

One more benefit: if you invest in a market-linked fund, regular investing can create a “rupee-cost averaging / dollar-cost averaging” effect. That doesn’t guarantee profits, but it can smooth the emotional ride because you buy more shares when prices are low and fewer when prices are high.

The SIP maturity formula (with clear breakdown)

The classic SIP calculator assumes you invest a fixed monthly amount P for n months, earning a constant monthly return r. The future value of a series of monthly investments (an annuity) is:

FV = P × [((1 + r)ⁿ − 1) / r]

Many SIPs are modeled as investing at the start of the month (money has one extra month to grow). In that case:

FV_start = FV × (1 + r)

In this calculator: r = (annualReturn − expenseRatio) / 12 (converted to a monthly decimal rate), and n = years × 12. If you add a lump sum, it grows as: LumpFV = L × (1 + r)ⁿ. Step‑up SIPs (increasing the monthly amount each year) are calculated month‑by‑month so the numbers stay transparent.

Example SIP scenarios (copy these and test)

Example 1 — “Classic” SIP: Invest $500/month for 10 years at 12%. Your total invested is about $60,000. The estimated maturity value can be substantially higher because each monthly deposit compounds for a different amount of time.

Example 2 — Step-up SIP: Start with $300/month, increase it 10% yearly for 15 years at 10%. Step-up plans often “feel” small at the beginning but can end up contributing much more total principal over time — which can dominate the final result.

Example 3 — Inflation reality check: If your maturity value is $200,000 after 20 years, but inflation averages 3%, the inflation-adjusted (today’s dollars) value is lower. That’s why planners use real returns.

Pro tip: run your SIP with a range of returns (e.g., 7%, 9%, 11%) and keep the plan that still works even if returns are weaker than expected.

How to read your SIP results

Your result box breaks your SIP into the three numbers that matter: Total Invested (what you contributed), Estimated Gains (growth above contributions), and Maturity Value (invested + gains).

If you see gains smaller than expected, check three things: (1) your time horizon (compounding is slow early), (2) your rate assumption (annual return and any expense ratio), and (3) whether you used end-of-month timing. Start-of-month SIPs usually show a slightly higher maturity value because each deposit has an extra month to grow.

The year-by-year table is designed for “shareable clarity”: it shows how, in later years, the portfolio value can start rising faster than your contributions. That’s the compounding curve that people love to screenshot.

Frequently Asked Questions

• What does SIP mean?

  SIP stands for Systematic Investment Plan. It’s a method of investing a fixed amount on a regular schedule (usually monthly) to build long-term wealth through consistency and compounding.

• Is SIP better than a lump sum?

  It depends. Lump sums can do better if markets rise soon after you invest, but SIPs reduce the stress of timing by spreading purchases over time. Many people use a mix: a small lump sum plus a monthly SIP.

• What annual return should I use?

  Use a realistic long-term expectation for your asset mix. If you’re unsure, run multiple scenarios (e.g., 7%, 9%, 11%) and plan based on the conservative one.

• Why does “start of month” give a higher value?

  Because each monthly contribution gets one extra month to compound. It’s the same idea as investing on day 1 instead of day 30.

• Does this include taxes?

  No. Taxes depend on your country, account type, holding period, and the specific investment. Use this as a pre-tax projection, then estimate taxes separately if needed.

• How does step-up SIP work?

  With step-up SIP, your monthly investment increases each year by a fixed percent (e.g., 10%). This calculator applies the increase once per year and simulates month-by-month growth.