What is a SIP?
A Systematic Investment Plan, or SIP, is a way of investing a fixed amount in a mutual fund at regular intervals, usually every month. The amount is debited from your bank account automatically and buys units of the fund at that day's price. When markets are down, the same amount buys more units; when they are up, it buys fewer. Over the years this smooths out the price you pay, and it removes the temptation to wait for the "right time" to invest.
For most salaried people, a SIP is the simplest way to turn monthly savings into long-term wealth. It is also the engine behind most FIRE plans, which is why knowing what your SIP could grow to is the first step to knowing when you can stop working.
How this SIP calculator works
You enter a monthly amount, a period and the yearly return you expect. The calculator assumes each instalment is invested at the start of the month and grows until the end of the period. It then shows the estimated value, how much of that is money you put in, and how much is growth.
It also does three things many basic SIP calculators don't:
- Step-up SIP. Most people's income rises over time, and increasing the SIP each year with it makes a large difference. Enter the yearly increase as a percentage.
- Today's value. ₹50 lakh in 20 years will not buy what ₹50 lakh buys today. Enter an inflation rate to see the result in today's rupees.
- Goal mode. Switch modes to work backwards: enter a target amount and a period, and see the monthly SIP you need to start with.
Worked examples
A plain SIP. ₹10,000 a month for 10 years at 12% a year grows to about ₹23,23,391. You invest ₹12 lakh, so a little under half of the final amount is growth. At 6% inflation, that sum is worth about ₹12.97 lakh in today's money.
The same SIP, increased 10% each year. Raising the SIP by 10% every year, starting from ₹10,000, takes the final value to about ₹33,74,326 over the same 10 years.
Giving it more time. Keep a flat ₹10,000 SIP going for 20 years instead of 10, at the same 12%, and it grows to about ₹99.91 lakh. Doubling the time more than quadruples the result, because growth in later years builds on all the earlier growth.
Working back from a goal. To reach ₹1 crore in 15 years at 12%, you need to start with about ₹19,819 a month.
Choosing a realistic return
The return you enter has the biggest effect on the result, and it is also the hardest number to know. Equity funds have done well over long periods in the past, but returns swing widely from year to year, and nothing guarantees future performance. Debt funds are steadier but usually grow more slowly.
Rather than relying on a single figure, try a range. Run the calculator at a return you consider optimistic, one you consider middle-of-the-road, and one you consider cautious. If your plan still works at the cautious number, it is a robust plan. Past returns of a specific fund are available in its factsheet; remember they reflect one period and one fund manager's choices.
Standard vs conservative method
Most SIP calculators in India divide the yearly return by 12 to get a monthly rate. That is the "standard" method here, so your results will match what you see elsewhere. The "conservative" method uses the exact monthly rate that compounds to your yearly return, which gives a slightly lower figure; for ₹10,000 a month over 10 years at 12%, it shows about ₹22,40,359 instead of ₹23,23,391. Neither is wrong. The conservative method is closer to how our FIRE calculations work.
What this calculator leaves out
- Tax. Capital gains tax may apply when you redeem units. The result here is before tax.
- Exit loads. Some funds charge a fee if you redeem within a set period.
- Market timing. Real returns arrive unevenly. The final value of a real SIP depends on how markets behave, especially in the last few years before you withdraw.
Use the calculator to compare scenarios and set targets, then check where your SIP fits into the bigger picture with the FIRE number calculator. When you are ready to draw money out, the SWP calculator shows how long a corpus lasts.