SIP Returns Formula Explained (With Example)

The formula most SIP calculators use is FV = P x [((1+i)^n - 1) / i] x (1+i), where P is your monthly investment, i is the assumed monthly rate of return, and n is the total number of months you invest. The rate you plug in is always an assumption, since actual mutual fund returns are never guaranteed and vary year to year.

Breaking down each part of the formula

• P (monthly investment): the fixed amount you invest every month, such as Rs 5,000.
• i (monthly rate): your assumed annual return divided by 12, and further divided by 100 to convert a percentage into a decimal. For an assumed 12% annual return, i works out to 0.01 (1% a month).
• n (number of months): the total number of monthly instalments, so 10 years of investing is 120 months.
• The bracket term: [((1+i)^n - 1) / i] calculates the growing value of a series of regular monthly deposits, each compounding for a different number of remaining months.
• The final (1+i): assumes each instalment is invested at the start of the month, so it earns one extra month of return. Some calculators leave this term out (end of month investing), which gives a slightly lower figure.

Worked example

Assume you invest Rs 5,000 a month for 10 years, at an assumed annual return of 12% (a common illustrative rate, not a promised one).

• P = Rs 5,000
• i = 12% / 12 / 100 = 0.01
• n = 10 x 12 = 120 months

Plugging these into the formula gives a future value of approximately Rs 11,61,695. Your total invested amount over 10 years is Rs 6,00,000 (Rs 5,000 x 120 months), so the gain over what you put in is approximately Rs 5,61,695, at this assumed 12% rate.

Try it here

SIP calculator with the formula example

Rs 5,000 a month, 12% assumed, 10 years. It should show about Rs 11,61,695.

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Why the assumed rate matters so much

Assumed annual return	Approx. future value after 10 years (Rs 5,000/month)	Approx. gain over invested amount
8%	About Rs 9,20,828	About Rs 3,20,828
12%	About Rs 11,61,695	About Rs 5,61,695
15%	About Rs 13,93,286	About Rs 7,93,286

These figures are illustrative examples at the stated assumed rates, not a prediction of what any real fund will return. A small change in assumed rate makes a large difference over 10 years, which is exactly why treating a calculator's projected number as a promise is a mistake.

What a SIP calculator cannot tell you

• Whether a specific mutual fund will actually deliver the rate you assumed. Past performance is not a guarantee of future returns.
• How taxes on your eventual gains will affect the amount you actually keep, which depends on the fund type and your holding period.
• How market ups and downs during the investment period might have felt in practice, since a smooth average return over 10 years often hides a bumpy ride year to year.

Step-up SIPs

Some calculators, including the FixDoks SIP calculator, support a yearly step-up, where your monthly instalment increases by a percentage each year rather than staying fixed. This changes the P value used in each year's contribution rather than the core formula, and it can meaningfully increase the final value if your income is expected to grow over the years you are investing.

Common mistakes

• Treating a calculator's projected value as a guaranteed outcome instead of an illustration based on an assumed rate.
• Forgetting to convert an annual rate to a monthly one correctly before using the formula manually.
• Ignoring taxes and fund charges, which reduce the actual return you keep compared to the raw calculated figure.
• Comparing SIP figures across two calculators without checking whether both assume the same rate, tenure and start-of-month versus end-of-month convention.

Lump sum versus SIP

The formula above is specifically for a series of regular monthly investments. A one-time lump sum investment uses a simpler compound interest formula instead, FV = P x (1+i)^n, where P is the one-time amount rather than a monthly instalment. The FixDoks SIP calculator can also estimate a lump sum, so you can run both at the same assumed rate and compare the results.

Where to check your assumptions

Rather than picking an assumed rate at random, look at a fund's own published long-term historical performance, published on the fund house's website or on AMFI's own resources, as a starting point for a more grounded assumption, keeping in mind that past performance still does not guarantee future results. A calculator is only as useful as the assumption fed into it, so spend more time choosing a sensible rate than worrying about the formula's exact mechanics. You can browse the full set of finance calculators for related tools like EMI and CAGR.

For a related explainer on compounding, see how CAGR measures a steady annual growth rate from a start and end value, which is a useful way to sanity check a fund's historical performance before you assume a similar rate going forward.

Tools for this

Frequently asked questions

Sources

• AMFI, Association of Mutual Funds in India (checked 2026-09)
• SEBI Investor website (checked 2026-09)

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