For a monthly SIP where contributions are assumed to be made at the beginning of each period, the projected future value can be estimated using the future value of an annuity due formula:
M = P × [((1 + i)^n − 1) ÷ i] × (1 + i)
Where:
- M = Projected maturity value
- P = SIP investment amount per period
- i = Periodic rate of return
- n = Total number of SIP instalments
- If the expected annual return is converted into an effective monthly return, the periodic rate can be calculated as:
i = (1 + r)^(1/12) − 1
Where:
r = Expected annual return expressed as a decimal
For example, if the expected annual return is 12%:
i = (1 + 0.12)^(1/12) − 1
i ≈ 0.009489 or 0.9489% per month
Suppose you invest ₹10,000 every month for 10 years and assume an annual return of 12%.
The total number of instalments would be:
n = 10 × 12 = 120
Using the effective monthly rate and the annuity due formula:
Projected Future Value ≈ ₹23.23 lakh
Total Amount Invested = ₹12 lakh
Estimated Gains ≈ ₹11.23 lakh
The exact result depends on the SIP contribution timing and the method used to convert the annual return assumption into a periodic rate.
If contributions are assumed to occur at the end of each period, the ordinary annuity formula is used instead:
M = P × [((1 + i)^n − 1) ÷ i]
The InXits SIP calculator should clearly disclose the contribution-timing and return-conversion assumptions used in its calculation.
