Rs 5 Crore Corpus With Rs 5000 SIP; How Much Time Will It Take? Calculation

Systematic Investment Plan (SIP) is a popular investment mechanism. Here is a brief introduction and a step by step guide on how to calculate your SIP.

What is SIP and Why Should You Choose SIP?

A Systematic Investment Plan (SIP) is a methodical way of investing money every month typically, into a selected mutual funds scheme. SIPs in Equity Linked Saving Schemes (ELSS) enjoy the EEE (Exempt, Exempt, Exempt) tax benefit. This means the ELSS SIPs offer significant tax benefits under Section 80C of the Income Tax Act, allowing you to save up to Rs. 1.5 lakh per year. Use a mutual fund SIP calculator to plan your investments and reap these tax advantages.

How To Calculate SIP?

SIP calculation only provides an approximate return on investment.

The SIP calculator works on the basis of the following formula
M = P × ({[1 + i]^n – 1} / i) × (1 + i)
Terms used in SIP Calculator
P is the amount invested at regular intervals
M is the sum you will get upon maturity
n is the Number of times payments made
i is the Interest rate

Let’s understand the working of the SIP mutual fund calculator with an example:

Amit, a young professional, wants to invest Rs5,000 monthly for 30 years at a 16.5% interest rate. The monthly interest rate is calculated as 16.5% / 12 = 1.37% or 0.0137 in decimal.

Where:

P is the monthly investment amount (Rs5,000)

r is the periodic interest rate (15 per cent per year, compounded monthly, so 16.5/12 = 1.37% per month or 0.0137 per cent)

n is the total number of payments (30 years * 12 months/year = 360 months)

Calculation:

Future Value = 5000 * (((1 + 0.0137)^360 - 1) / 0.0137) * (1 + 0.0137)

You'll find:

Future Value is about Rs 5 crore

5000, 30 years,16.5%

Therefore, Amit's investment of Rs10,000 per month for 30 years at a 15% annual interest rate will grow to approximately ₹3.08 Cr.