Formula for Calculating SIP Returns
 

The formula commonly used for calculating SIP returns is:
M=P×((1+r)n−1r)×(1+r)M=P×(r(1+r)n−1)×(1+r)
Where:

• MM is the maturity amount.
• PP is the monthly investment amount.
• rr is the monthly rate of return (annual rate divided by 12).
• nn is the total number of SIPs made (number of years times 12)

Here is an example -


• Investment Details:
• Monthly Investment: ₹1,000
• Investment Tenure: 5 years
• Expected Rate of Return: 12% per annum

Estimated Results:

• Total Investment: ₹60,000
• Estimated Maturity Value: Approximately ₹83,000
• Profit: About ₹23,000


Impact of Higher Return:

• 15% Return: Maturity Value could be around ₹94,000, with a profit of about ₹34,000.