Systematic Investment Plan (SIP) Calculator

A systematic investment plan is a standing instruction to buy a fixed rupee amount of a mutual fund scheme on a fixed date each month, so the projection is the future value of a level annuity. Each instalment compounds for the months remaining until the end of the term, and summing that geometric series gives P multiplied by ((1+r)^n - 1) divided by r. The extra factor of (1+r) makes it an annuity due rather than an ordinary annuity, reflecting that the instalment is invested at the start of the period rather than the end; over a 10-year plan at 12 percent that single factor adds about 1 percent to the corpus. The monthly rate r is the stated annual figure divided by 12, and n is months, so a 15-year plan compounds through 180 periods. Equity returns used in these projections usually sit between 10 and 14 percent for diversified large-cap and flexi-cap funds, higher and far more volatile for mid- and small-cap schemes, and 6 to 8 percent for debt funds. The critical limitation is that a mutual fund has no fixed rate at all: units are bought at whatever the net asset value is on each instalment date, so the realised outcome is an internal rate of return across uneven cash flows, reported as XIRR, and a sequence of poor returns near the end of the term hurts far more than the same returns at the start. The model also ignores the expense ratio, which is deducted from NAV daily and typically runs 0.5 to 1.0 percent for direct plans and 1.5 to 2.25 percent for regular plans, any exit load, and capital gains tax on redemption. Minimum instalments are commonly 500 rupees a month, with some schemes accepting 100.

Pooled investing in India began with the Unit Trust of India, established by an Act of Parliament in 1963 and launching Unit Scheme 1964, which for more than two decades was the only mutual fund available to Indian savers. Public sector banks and insurers were permitted to launch funds from 1987, and the industry opened to private and foreign sponsors in 1993. The Securities and Exchange Board of India issued its first mutual fund regulations in 1993, replaced by the comprehensive 1996 framework that still governs scheme structure, disclosure, and valuation, and the Association of Mutual Funds in India was formed in 1995 as the industry body. Recurring contribution schemes were not new in principle, since recurring deposits at post offices and banks had long been the standard household saving habit, but applying the idea to equity funds required cheap, reliable, repeatable debits. Electronic clearing service mandates in the late 1990s and 2000s, and later the National Automated Clearing House framework, made it practical to collect small monthly sums from millions of bank accounts at low cost. Distributors and asset managers marketed the resulting product around rupee cost averaging, the argument that a fixed sum buys more units when the net asset value is low. Sustained industry campaigns from the mid-2010s, together with the shift toward direct plans after SEBI banned entry loads in 2009, turned the monthly SIP mandate into the default route by which Indian households hold equities.