Question 1

What is a SIP and how does it work?

Accepted Answer

A Systematic Investment Plan (SIP) is a method of investing a fixed amount regularly — typically monthly — into a mutual fund or investment vehicle. It leverages rupee/dollar cost averaging, meaning you buy more units when prices are low and fewer when prices are high, reducing the impact of market volatility over time.

Question 2

How is SIP return calculated?

Accepted Answer

SIP returns are calculated using the future value of an annuity formula: FV = P × [((1+r)^n - 1) / r] × (1+r), where P is the monthly investment, r is the monthly rate of return (annual rate / 12), and n is the total number of months. This accounts for compound growth on each monthly contribution.

Question 3

What is a good expected return rate for SIP?

Accepted Answer

Expected returns depend on the type of fund. Equity mutual funds have historically delivered 10-15% annually over long periods, while debt funds typically return 6-8%. A balanced or hybrid fund might deliver 8-12%. Always remember past performance does not guarantee future results, and actual returns can vary significantly.

Concept	Details
Formula	FV = P x [((1+r)^n - 1) / r] x (1+r)
P (Monthly Investment)	The fixed amount you invest each month
r (Monthly Rate)	Annual return rate divided by 12
n (Total Months)	Investment period in years x 12
Compounding Effect	Each contribution earns returns on its own returns over time
Wealth Gain Ratio	Total value / Total invested — higher means more growth

SIP Calculator

Plan Your SIP

Track your investment contributions alongside daily expenses

How It Works

Related Free Calculators