Compound Interest & SIP Calculator

about this tool

A lump sum, a SIP, or both

Put in a starting amount, an amount every month, or both, with the return you expect and how long you will invest, and the tool shows what it grows to: the total you put in, the returns on top, and a year-by-year table and chart. Switch to the monthly amount for a goal and it works backwards: give it the target and it finds the monthly amount that reaches it, worked out exactly and rounded up to the paisa or cent, with any step-up and starting amount included. The target is in future money; raise it by inflation first if you think of it in today's prices.

Amounts can be typed with Indian or international grouping — 1,00,000 and 100,000 both read as one lakh — with or without Rs. or ₹ in front. A comma that could be a decimal mark, as in 7,5, is refused rather than guessed at. A rupee value at the end is also given in lakh or crore. Amounts are shown with the currency's symbol and comma grouping; Australian, Canadian and Singapore dollars show a plain $.

The arithmetic

The balance is worked out month by month. The annual rate is turned into the equivalent monthly rate for the compounding you choose, (1 + r/n)^(n/12) − 1, so a lump sum grows by exactly P(1 + r/n)^(nt) whatever the frequency: the $1,500 at 4.3% compounded quarterly of the textbook example comes to $1,938.84 after six years. Each month's instalment goes in at the start of the month, as mutual-fund calculators assume, and earns that month's return; at the end of the month, it does not. With monthly compounding the start-of-month result is the formula SIP calculators publish, P × ((1 + i)^n − 1) / i × (1 + i): ₹1,000 a month at 12% for a year is ₹12,809.33 (shown as ₹12,809), and ₹10,000 a month for ten years ₹23,23,391. With quarterly compounding it matches the Indian recurring-deposit formula. The growth tests check the tool against those published figures and closed forms, not against itself; the goal is checked by running its answer back through the projection.

Monthly compounding treats 12% a year as 1% a month, which is what common SIP calculators do and is worth a little more than 12% a year. A fund's returns are usually quoted as a yearly figure (CAGR); to use that figure as it is, choose yearly compounding.

A step-up raises the monthly amount by a percentage at the start of each year after the first. Inflation turns the final balance into today's money, dividing by the rise in prices over the same period. The year-by-year table's first row includes the starting amount in what was put in, so the column adds up to the total.

What it leaves out

This is a projection at one steady rate. Fixed deposits and bonds come close to that; equity funds never do, and their returns vary from year to year and can be negative, so the order of good and bad years matters in a way no single rate shows. Tax, fund charges and exit loads are not included, and banks' own fixed-deposit rules can differ slightly, especially for part quarters. Nothing is stored or sent anywhere. For a loan's monthly payment and its schedule, the EMI calculator does the same sums the other way round.

questions

How is a SIP’s value worked out?

With the formula mutual-fund calculators use: M = P × ((1 + i)^n − 1) / i × (1 + i), where P is the monthly amount, i the monthly rate and n the number of months. The last (1 + i) is there because each instalment goes in at the start of the month and earns that month’s return. ₹1,000 a month at 12% a year for a year comes to ₹12,809.33, shown as ₹12,809; ₹10,000 a month for ten years comes to ₹23,23,391. Choose end of month and the last factor drops out.

What does the compounding frequency change?

How often returns are added to the balance, and so how much the annual rate is really worth. The tool turns the annual rate into the equivalent monthly one, (1 + r/n)^(n/12) − 1, so a lump sum grows by exactly P(1 + r/n)^(nt): $1,500 at 4.3% compounded quarterly is $1,938.84 after six years. Fund returns are usually quoted as a yearly figure (CAGR); to use that as it is, choose yearly. Monthly, which treats 12% as 1% a month, is what common SIP calculators do and gives a little more.

What is a step-up SIP?

A SIP whose monthly amount rises each year, usually as income does. A 10% step-up on ₹10,000 means ₹11,000 a month in the second year and ₹12,100 in the third. Over long terms it makes a large difference, because the later, larger instalments still have years to grow. The tool shows the monthly amount in the last year as well as the total.

What does “in today’s money” mean?

The final value divided by the growth in prices over the same years, so you can see what it will buy. At 6% inflation prices double in about twelve years, so ₹1 crore in twelve years buys roughly what ₹50 lakh buys now. The goal target is in future money, so for a goal you think of in today’s prices, raise it by inflation before entering it.

Are these returns guaranteed?

No. The calculator assumes one steady rate for the whole period, which fixed deposits and bonds come close to, but equity funds never do: their returns vary from year to year and can be negative. Tax and fund charges are not included either. Use a cautious rate, and try a lower one to see the range.