A Systematic Investment Plan (SIP) lets you invest a fixed amount every month into a mutual fund instead of putting in one lump sum. Because each monthly installment starts compounding from the day it's invested, the maturity value ends up higher than simply multiplying your monthly amount by the number of months.
The SIP Future Value Formula
FV = P × [((1 + r)n − 1) / r] × (1 + r)
- P is your fixed monthly investment
- r is the expected monthly return (annual return divided by 12, divided by 100)
- n is the total number of monthly installments (years × 12)
The extra ×(1 + r) at the end accounts for each installment earning a return for the month it's invested in, not just from the following month.
A Worked Example
Investing ₹5,000 a month for 10 years at an expected 12% annual return (r = 1% monthly, n = 120 months) grows to roughly ₹11,61,697. Of that, ₹6,00,000 is money you actually put in, and about ₹5,61,697 is investment growth — nearly as much as the total invested.
Why Starting Early Beats Investing More Later
Because each installment compounds for a different length of time, the earliest SIP payments do disproportionately more work than the last few years' worth. Two people investing the same monthly amount, one starting 5 years earlier, can end up with very different maturity values purely because of how long the money had to grow.
Returns aren't guaranteed — mutual fund SIPs are subject to market performance. Enter your own monthly amount, expected return, and time period into our SIP calculator below to see the projected maturity value, total invested, and estimated returns.