SIP Calculator
Investing a fixed amount every month, and raising it a little each year. The step-up is the part most calculators leave out, and it changes the outcome more than the return assumption does.
Final value
$9,892,553.65
- Total invested
- $2,400,000.00
- Growth
- $7,492,553.65
- Growth as a share
- 75.7%
- Monthly at the end
- $10,000.00
- From the lump sum
- $0.00
- Investing the same amount every month buys more units when prices are low and fewer when they are high, which takes the timing decision away from you. It does not protect against a market that falls and stays down.
- The return is an assumption, not a promise. Markets do not deliver a steady figure, and a projection that only works at an optimistic rate is a fragile plan.
- This is before tax and before charges. The fund's own annual charge comes straight off the return, and over these periods it costs far more than it looks.
About the SIP calculator
A systematic investment plan is a standing instruction: the same amount, on the same day, every month, regardless of what the market did. The mechanical benefit is that a fixed sum buys more units when prices are low and fewer when they are high, so the average price you pay works out below the average price over the period. The larger benefit is that it removes the decision, and the decision is where most damage gets done.
The step-up is the feature worth understanding. Raising the monthly amount 10% a year in line with a pay rise turns 10,000 a month over twenty years from about 9.89 million into about 19.69 million — roughly double, for increases that never feel large at the time. Most of that comes from the early rises, which have the longest left to compound.
What the arithmetic cannot capture is that the plan has to survive a bad market. Every projection here assumes you keep contributing through the years when the balance is below what you paid in, and those are precisely the years when the contributions do the most good and feel the most pointless.
The return is an assumption and the charge is not. A fund's annual charge comes straight off the return and compounds against you for the whole period, which over twenty years costs far more than the number suggests.
What it works out
- Monthly investing over any period
- An annual step-up in the amount
- A starting lump sum alongside the monthly plan
- What you contributed against what it earned
The formula
Each month: Balance = Balance × (1 + r) + Contribution
One line, applied every month. The balance earns a month's return, then the new contribution lands on top. With a fixed contribution this has a closed form — the future value of an annuity — but with a step-up it does not, so it is simulated.
Ten thousand a month for twenty years at 12% is 2.4 million contributed and about 9.89 million at the end. Three quarters of the final figure is growth rather than contributions, and almost all of that growth belongs to the early years' money.
The step-up compounds on top of that. Raising the contribution 10% each anniversary means the final year's contribution is about 61,000 rather than 10,000, and the total reaches roughly 19.69 million. You contributed 6.87 million to get there rather than 2.4 million, so it is not free — but the ratio of what you get to what you put in stays strong because the increases arrive early enough to work.
Contributions land at the end of each month, which is the conservative convention. Investing at the start of the month instead gives every contribution one extra month of growth.
- r
- The monthly return — the annual figure divided by twelve.
- Contribution
- What goes in each month. With a step-up it rises on each anniversary.
- Balance
- What has accumulated. It does the compounding; the contributions feed it.
A worked example
10,000 invested every month for twenty years at an assumed 12% a year, with no annual increase.
That works out to $9,892,553.65 .
- Total invested
- $2,400,000.00
- Growth
- $7,492,553.65
- Growth as a share
- 75.7%
- Monthly at the end
- $10,000.00
- From the lump sum
- $0.00
Questions
What does a 10,000 monthly SIP grow to in 20 years?
About 9.89 million at an assumed 12% a year. You would have contributed 2.4 million of that, so roughly three quarters of the final figure is growth.
What is a step-up SIP?
One where the monthly amount rises by a set percentage each year, usually in line with pay. A 10% annual step-up roughly doubles the twenty-year outcome compared with a flat amount, because the early increases have the longest to compound.
Is investing monthly better than a lump sum?
Not usually, on the arithmetic. Money invested earlier has longer to grow, so a lump sum invested at the start beats the same total spread out — most of the time. Investing monthly wins on the things arithmetic does not measure: it is what most people can actually do, and it removes the timing decision.
What return should I assume?
A figure you would still be comfortable with if it turned out optimistic. Long-run equity returns vary enormously by market and period, and a plan that only works at a high assumed rate is a fragile plan. Try it at two or three points lower and see whether the answer still works.
Does this account for charges?
No — enter a return net of the fund's annual charge, or use the direct-versus-regular calculator to see what the charge itself costs. Over twenty years the difference is much larger than the number on the factsheet suggests.
What happens if I stop contributing partway?
What is already invested keeps compounding, so you do not lose it — but you lose everything the missed contributions would have earned. Stopping early in the period costs far more than stopping near the end.
Should I invest more when the market falls?
A fixed monthly amount already does something like that automatically: the same money buys more units at lower prices. Deliberately adding more requires knowing the market has fallen far enough, which is the judgement a standing instruction exists to avoid.
Does this include inflation?
No. The result is in today's money only if you enter a return net of inflation. At a 12% nominal return with 5% inflation, the real growth is nearer 7%, and the final figure will not buy what it appears to.