How to calculate SIP returns:
from monthly amount to maturity value

What SIP returns actually measure

A systematic investment plan (SIP) invests a fixed amount at regular intervals, usually each month in a mutual fund. The useful question is not simply "what is the return?" but "what could all my instalments be worth on a given date?"

Your total contribution is certain: monthly amount × number of months. The final value is an estimate, because fund returns vary and each instalment buys units at a different price.

That is why a SIP calculator asks for four inputs, and each one is a choice rather than a fact.

• Monthly amount: what leaves your bank account each month.
• Assumed annual return: a scenario for planning, never a promised rate.
• Duration: the number of monthly instalments.
• Timing: instalments at the start or end of the month give slightly different answers.

SIP maturity formula and how to apply it

This projection assumes an instalment at the end of each month and treats the annual percentage as a nominal rate divided by 12. Real markets will not deliver the return in even monthly steps.

1. 1Fix the monthly amount M.
2. 2Divide the assumed annual percentage by 1200 to get i.
3. 3Multiply years by 12 to get n.
4. 4Apply the formula, then subtract M × n to see the estimated growth.

The bracketed part is a growth factor: it tells you how many rupees each ₹1 of monthly instalment becomes by the end. Multiplying it by your instalment gives the maturity value.

Example: ₹5,000 a month for 10 years at an assumed 12%

Suppose you invest ₹5,000 at the end of every month for 120 months. At an assumed 12% a year, the monthly rate in this model is 1%.

The factor is (1.01¹²⁰ − 1) ÷ 0.01 ≈ 230.04, and ₹5,000 × 230.04 ≈ ₹11,50,193. Paying at the start of each month instead lifts this to about ₹11,61,695.

Consistency matters as much as the amount. If you pay for five years and then stop, the ₹4,08,348 balance left invested for another five years at the same 12% grows to about ₹7,41,845. Continuing the SIP for the full ten years reaches ₹11,50,193.

Of the final amount, ₹6,00,000 is your own money and the rest is projected growth. The earlier an instalment goes in, the more months it compounds, which is why the first few years of a SIP matter more than their size suggests.

How years and the return assumption change the result

Two inputs drive most of the difference between SIP projections: how long you invest and which return you assume. First, the duration, holding 12% constant.

Going from 5 to 10 years adds about ₹7.4 lakh to the value; going from 15 to 20 years adds about ₹24.5 lakh. The same monthly amount does far more work in its later years because it compounds on a larger base.

Now hold the duration at 10 years and change the return assumption.

Each two-point step in the assumption moves the 10-year value by roughly ₹1 lakh to ₹1.3 lakh at this amount. A round figure like 12% is one scenario among several, not a typical outcome.

Which figure should you assume? Look at the long-term record in the fund's own factsheet, then choose a number below it. Past returns describe what happened, not what the next ten years will deliver, so a cautious assumption leaves room for disappointment.

Working backwards from a goal, and the rate-conversion trap

You can turn the formula around to find the monthly amount for a target. To reach ₹1,00,00,000 in 20 years you would need about ₹10,109 a month at an assumed 12%, or about ₹13,169 a month at an assumed 10%. The lower the assumption, the larger the instalment.

Also check how the calculator converts an annual rate into a monthly one. Dividing by 12 gives 1% a month for 12%. If your 12% is an effective yearly rate, the monthly rate is about 0.949%, and the same SIP reaches about ₹11,09,650, which is ₹40,543 lower.

SIP projection, XIRR and CAGR: which to use

A projection looks forward at a hypothetical value. XIRR looks back: it finds the annualised return that matches your actual instalment dates, amounts and the current portfolio value.

• Use the projection to plan a future goal with regular investing.
• Use XIRR to judge how an existing SIP has performed on irregular dates.
• Use CAGR for one starting amount and one ending value. Applying it to ₹6,00,000 paid over ten years and an ₹11,50,193 value would wrongly show about 6.7%, because most instalments were invested for far less than ten years.

A full set of dated cash flows is needed for XIRR, so a spreadsheet or your fund statement is the right place to compute it.

Mistakes to avoid when estimating SIP returns

• Treating the projected value as a promise instead of a scenario.
• Comparing the growth of a 5-year plan with a 15-year plan without comparing how much was invested.
• Ignoring the expense ratio, exit load and tax, which reduce what you keep.
• Mixing end-of-month and start-of-month models when comparing two calculators.
• Assuming a lump sum and a SIP of the same total are interchangeable; the SIP money goes in later, so it has less time to grow.

Finally, remember inflation. At an assumed 6% a year, ₹11,50,193 ten years from now buys roughly what ₹6,42,262 buys today, so judge a goal in today's money as well as in future rupees.

For the one-time version of this calculation, see the lump sum guide; for a plan that raises the instalment every year, see the step-up SIP guide.