How SIP Returns Are Estimated

What a SIP does

A SIP is a method of investing periodically, often monthly, into a mutual fund. Each instalment buys units at the applicable net asset value. The number of units purchased varies with the NAV; this is commonly called rupee-cost averaging, but it does not prevent losses.

How projections work

A SIP calculator estimates a future value using the contribution amount, frequency, duration and an assumed rate of return. Many calculators use a monthly rate derived from an annual assumption. The result is a mathematical scenario, not a forecast of market performance.

How to use a SIP calculator

Model several assumptions rather than relying on one optimistic rate.

1. Enter the recurring contribution.
2. Select monthly or other available frequency.
3. Enter the investment period.
4. Choose a conservative, base and optimistic return assumption for comparison.
5. Review total contributions separately from estimated gains.

Worked example

If you invest ₹5,000 at the end of every month for 10 years, you contribute ₹6,00,000 in total. At an illustrative 10% annualised assumption with monthly compounding, the future value is roughly ₹10.2 lakh. The actual value may be materially higher or lower.

Important risks

Mutual fund returns are market-linked and not guaranteed. Taxes, expense ratios, exit loads, timing of instalments and actual NAV movements affect outcomes. For historical performance, compare appropriate benchmarks and rolling periods rather than extrapolating one past return.