How Does a SIP Calculator Work?
A SIP (Systematic Investment Plan) calculator helps you estimate the wealth you can create by making regular monthly investments in mutual funds. It utilizes the power of compound interest to show you how a small monthly contribution can grow into a massive corpus over time.
The Mathematical Formula
The SIP calculator uses the standard future value formula for an annuity (assuming investments are made at the beginning of each month):
$FV = P \times \frac{(1 + i)^n - 1}{i} \times (1 + i)$
- FV = Future Value of the investment
- P = Regular monthly investment amount
- i = Monthly interest rate (Annual Rate / 12 / 100)
- n = Number of monthly investments