What a SIP can and cannot tell you
How the maturity figure is built, why the same rupee invested early is worth several times one invested late, and the four assumptions the number quietly rests on.
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In short
- A SIP instalment is invested at the start of its period, so the correct formula is an annuity due. Dropping the trailing (1+i) understates a fifteen-year corpus by about 1%.
- Time matters far more than amount. ₹10,000 a month for 15 years beats ₹20,000 a month for 8 by ₹18 lakh, on ₹1.2 lakh less invested.
- Roughly half the final corpus of a 20-year SIP arrives in the last five years, which is why stopping early costs disproportionately.
- The expected return is an assumption you choose, not a property of the calculator. Run it at 8% as well as 12%.
- A SIP does not protect against loss. It averages your purchase price, which is a different and smaller promise.
A systematic investment plan is a standing instruction: a fixed amount leaves your bank on a fixed date and buys units of a mutual fund. That is the entire mechanism. Everything interesting about it comes from what happens when you repeat that for a long time without interruption.
The formula, and the part most calculators get wrong
Each instalment is a separate investment that compounds for however long it remains invested. The first instalment of a fifteen-year SIP compounds for 180 months; the last compounds for one. The maturity value is the sum of all of them.
For a level SIP that sum has a closed form — the future value of an annuity due:
FV = P × [((1 + i)ⁿ − 1) ÷ i] × (1 + i)
where P is the instalment, i is the periodic return and n the number of instalments.
The trailing (1 + i) is the part that gets dropped. It is there because the money leaves your account at the start of the period and is invested that day, so it earns for the whole period rather than from the end of it. Without it you have computed an ordinary annuity, which assumes the money arrives at the end of each month.
The difference sounds trivial and is not:
| Monthly | Return | Years | Annuity due (correct) | Ordinary annuity | Understated by |
|---|---|---|---|---|---|
| ₹10,000 | 12% | 15 | ₹50,45,760 | ₹49,95,802 | ₹49,958 |
| ₹25,000 | 12% | 20 | ₹2,49,78,698 | ₹2,47,31,384 | ₹2,47,314 |
On a twenty-year plan that is nearly two and a half lakh of missing corpus, from one factor.
Time beats amount, and it is not close
This is the single most useful thing a SIP calculator can show you, and it is worth doing the comparison explicitly. Both of these people invest at 12%:
| Monthly | Years | Total invested | Final corpus | |
|---|---|---|---|---|
| Starts at 25 | ₹10,000 | 15 | ₹18,00,000 | ₹50,45,760 |
| Starts at 32 | ₹20,000 | 8 | ₹19,20,000 | ₹32,30,531 |
The second person invests more money — ₹1.2 lakh more — and ends with ₹18 lakh less. Seven years of compounding is worth more than doubling the instalment.
The reason is that early instalments have the longest runway. A rupee invested in year one at 12% becomes ₹5.47 after fifteen years. The same rupee invested in year ten becomes ₹1.76. They are the same rupee; only the time differs.
Why the last years produce most of the money
Take a twenty-year SIP of ₹10,000 at 12%:
| Year | Invested so far | Corpus | Corpus from growth |
|---|---|---|---|
| 5 | ₹6,00,000 | ₹8,24,864 | 27% |
| 10 | ₹12,00,000 | ₹23,23,391 | 48% |
| 15 | ₹18,00,000 | ₹50,45,760 | 64% |
| 20 | ₹24,00,000 | ₹99,91,479 | 76% |
Between year fifteen and year twenty the corpus roughly doubles, while contributions rise by only a third. Nothing changed about the plan — the balance simply became large enough that returns on it outweighed new money going in.
The practical consequence is uncomfortable: stopping a SIP in its final years costs disproportionately, and those are exactly the years when a large accumulated balance makes people nervous enough to stop.
What a step-up actually does
A step-up SIP raises the instalment by a fixed percentage each year, usually alongside a salary increase. It has no closed form — the instalment changes annually, so each year's contributions have to be compounded separately, which is what this calculator does.
The effect is larger than the percentage suggests, because the extra money still gets years to grow:
| Plan | Total invested | Corpus at 15 years, 12% |
|---|---|---|
| ₹10,000 level | ₹18,00,000 | ₹50,45,760 |
| ₹10,000 with 10% annual step-up | ₹38,12,698 | ₹86,83,849 |
Doubling the money invested more than doubles the corpus, because the increases arrive early enough to compound.
A step-up also does something a level SIP does not: it keeps the plan proportionate to your income. A ₹10,000 instalment that felt significant at a ₹60,000 salary is trivial at ₹1,50,000, and a plan that quietly shrinks in real terms is how people reach forty having "invested regularly" for a decade with little to show.
The four assumptions
The maturity figure is arithmetic, and the arithmetic is exact. The assumptions are what make it an estimate.
The return is an assumption you chose. Not a property of the fund, not a projection, and certainly not a promise. Indian equity funds have averaged roughly 11–13% over long periods, but that average conceals years of +40% and −30%. Run the calculator at 8% and at 12% and treat the pair as the range.
Returns are assumed smooth. They never are. Two funds that both average 12% over fifteen years produce different amounts if their good and bad years fall in a different order, because a poor year early costs less than a poor year late when the balance is large.
Nothing is withdrawn. Every projection assumes untouched money. A partial withdrawal in year eight removes not just that amount but everything it would have earned afterwards.
Tax and costs are excluded. Equity fund gains held over a year attract long-term capital gains tax above the annual exemption; debt fund gains are taxed at your slab rate. Expense ratios of 0.5% to 1.5% come out of the return before you see it, and an exit load may apply if you redeem early.
SIP against lump sum
They answer different questions and the honest answer is that neither always wins.
A lump sum invested at the start of a rising market beats a SIP comfortably, because all of the money gets the full period. The same lump sum invested just before a fall does far worse, because all of the money takes the full hit.
A SIP averages your purchase price across many dates. That is the whole benefit, and it is worth being precise about what it means: it reduces the consequences of bad timing, not the risk of loss. A SIP running through a market that falls for five years and stays there loses money, steadily.
If you have a lump sum and a ten-year horizon, the evidence generally favours investing it rather than spreading it, because markets rise more often than they fall. If a sharp drop would make you sell, spreading it over six to twelve months costs little and removes that risk — and the risk of selling at the bottom is larger than the modest return you give up.
What SIP does not do
It is not a product. Nothing is bought called "a SIP" — it is a payment instruction attached to a fund, and the fund is what determines your outcome. A SIP into a poor fund is a disciplined way to lose money.
It does not guarantee returns. A recurring deposit guarantees returns. A SIP into an equity fund does not, and any material describing it as safe is describing something else.
It does not require you to time anything, which is its real advantage over almost every alternative — not because timing is impossible, but because almost nobody does it well, including the people who believe they do.
Missing an instalment
Nothing dramatic happens. A failed mandate means that month's units are not bought; the plan continues next month. Most funds impose no penalty, though your bank may charge for the failed auto-debit and repeated failures can cause the mandate to be cancelled.
The real cost is the compounding that instalment would have done. One missed ₹10,000 early in a fifteen-year plan is about ₹55,000 of final corpus — worth knowing, but not worth the panic it usually causes. Restarting matters far more than making up the gap.
What this calculator assumes
- Instalments are invested at the start of each period, compounded at the periodic rate.
- The expected return is constant across the whole term.
- Nothing is withdrawn and no instalment is missed.
- Figures are before tax, expense ratio and exit load.
- A step-up, where used, is applied once at the start of each year.