How is SIP return calculated?

As the future value of a series of monthly payments: FV = P × ((1 + i)^n − 1) ÷ i × (1 + i). For 1,000 a month at 12% for 5 years: i = 0.01, n = 60, (1.01)^60 = 1.8167, so FV = 1,000 × 81.67 × 1.01 = 82,486, from 60,000 invested.

What is a step-up SIP?

A SIP whose instalment rises by a fixed percentage every year. Because the larger later instalments add up quickly, a 10% yearly step-up roughly doubles the total invested over 15 years and lifts the final value by about three-quarters in the example above.

What return should I assume for a SIP?

There is no correct figure, which is why it is an input. Equity funds have historically returned more than debt funds over long periods but with large swings; try a cautious, a middle and an optimistic rate to see how much of the result depends on the assumption.

Is SIP better than a lump sum?

Neither always wins. A lump sum invested at once is exposed to the market for longer and usually ends higher when markets rise; a SIP spreads the buying over time, which smooths the price paid and suits money that arrives monthly from a salary.

Are SIP returns guaranteed?

No. Mutual fund and stock returns vary and can be negative; the figure here is a projection at the rate you enter. Recurring deposits and other fixed-rate products are the guaranteed alternative, at lower rates.

SIP Calculator (Monthly Investment Returns, with Step-Up)

Future value of a monthly SIP or regular investment at an assumed return, with an optional yearly step-up, the working and a year-by-year projection.

Inputs

CurrencyAuto (USD)

Monthly investment

$5$5,200

Expected annual return(%)

0 %30 %

Investment duration(years)

1 years40 years

Annual step-up (optional)(%)

0 %50 %

Include CalculateEveryday mark

Future value

$92,083

Future value35% from gains

Invested$60,000(65%)
Gains$32,083(35%)

Year-by-year projection

Year	Invested	Value	Gains
1	$6,000	$6,266	$266
2	$12,000	$13,053	$1,053
3	$18,000	$20,403	$2,403
4	$24,000	$28,363	$4,363
5	$30,000	$36,983	$6,983

Total invested: $60,000
Estimated gains: $32,083
Duration: 120 months
Monthly return (i): 8% ÷ 12 = 0.6667%
Working: FV = P × ((1 + i)^120 − 1) ÷ i × (1 + i); (1 + i)^120 = 2.2196
Gains as a share of the final value: 35%

Assumes a constant monthly return, compounded monthly — real markets don't move in a straight line.

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What each SIP input means

Monthly investment: The amount invested each month, at the start of the month.
Expected annual return: An assumed average yearly return. Long-run equity returns have averaged well above debt or deposit returns, but with large swings; try two or three rates to see the range.
Investment duration: How long you keep investing. The value is shown at the end of the last month.
Annual step-up (optional): Optional: how much you raise the SIP each year, in percent. 10% is a common choice to keep pace with salary rises; leave at 0 for a flat SIP.

SIP formula

FV = P × ((1 + i)^n − 1) ÷ i × (1 + i), with i = annual return ÷ 12 ÷ 100 and n = months · with a step-up, each year's instalment is the last year's × (1 + step-up)

FV = P \times \dfrac{(1+i)^n - 1}{i} \times (1+i)

A systematic investment plan (SIP) puts the same amount into an investment every month — the usual way to buy mutual funds in India, and the same idea as a monthly transfer into an index fund or a 401(k) anywhere else. Each instalment grows for the months left until the end, so the first one compounds the longest and the last only for a month. Added up, that is the future value of an annuity, which OpenStax's Contemporary Mathematics gives as payment × ((1 + i)^n − 1) ÷ i; because SIP instalments go in at the start of each month, the result is multiplied by (1 + i) once more. Here i is the assumed annual return divided by 12 and n the number of months. Many investors raise their SIP each year as income grows, so the page takes an optional step-up percentage and then works month by month, lifting the instalment every twelve months. The result shows the final value, what you put in, the gains and their share, and a projection for each year. The return is an assumption: fund returns go up and down and are not guaranteed.

SIP worked example

Investing $500 a month for 10 years at an assumed 8% annual return: i = 8 ÷ 12 = 0.667% a month, (1 + i)^120 = 2.2196, and the future value is about $92,083 — against $60,000 actually invested, so about a third (35%) of the final value is growth rather than contributions.

More SIP examples

Start at $500 a month and raise it by 10% every year for 15 years at 10%: the last year's instalment is about $1,899 a month, $190,635 goes in altogether, and the SIP grows to $371,892 — against $208,962 with no step-up.

$200 a month for 30 years at 8%: only $72,000 is invested, but it grows to $300,059 — three-quarters of the final value is growth, because the early instalments compound for decades.

Where the SIP calculator can give the wrong answer

The return is held constant every month. Real funds rise and fall, and the order of good and bad years changes the outcome even when the average is the same.
Expense ratios, exit loads and taxes on gains are not deducted. A 1% yearly expense ratio takes roughly a percentage point off the return you should enter.
Instalments are assumed to go in at the start of each month. Calculators that assume the end of the month show slightly less, by one month's return.
A 0% return gives exactly the amount invested, with no growth.
A step-up applies once a year, from month 13 onward, and the instalment is not rounded; a real SIP rounds to the nearest rupee or dollar.

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SIP reference table

What 100 a month becomes, by return and years (start-of-month instalments)
Annual return	10 years	20 years	30 years
6%	16,470	46,435	100,954
8%	18,417	59,295	150,030
10%	20,655	76,570	227,933
12%	23,234	99,915	352,991

Source: Computed with FV = P × ((1 + i)^n − 1) ÷ i × (1 + i) (OpenStax §6.6)

SIP FAQ

: As the future value of a series of monthly payments: FV = P × ((1 + i)^n − 1) ÷ i × (1 + i). For 1,000 a month at 12% for 5 years: i = 0.01, n = 60, (1.01)^60 = 1.8167, so FV = 1,000 × 81.67 × 1.01 = 82,486, from 60,000 invested.
: A SIP whose instalment rises by a fixed percentage every year. Because the larger later instalments add up quickly, a 10% yearly step-up roughly doubles the total invested over 15 years and lifts the final value by about three-quarters in the example above.
: There is no correct figure, which is why it is an input. Equity funds have historically returned more than debt funds over long periods but with large swings; try a cautious, a middle and an optimistic rate to see how much of the result depends on the assumption.
: Neither always wins. A lump sum invested at once is exposed to the market for longer and usually ends higher when markets rise; a SIP spreads the buying over time, which smooths the price paid and suits money that arrives monthly from a salary.
: No. Mutual fund and stock returns vary and can be negative; the figure here is a projection at the rate you enter. Recurring deposits and other fixed-rate products are the guaranteed alternative, at lower rates.