How to Calculate SIP Returns Without Trusting Anyone's Estimate

Published 29 June 2026 · Investing

Rohit's relationship manager in Pune sent him a WhatsApp message with a projection: his ₹5,000 monthly SIP would grow to ₹50 lakh. Rohit stared at the number. It looked impressive. But was it real, or was the manager assuming some fantasy return rate? Verifying any SIP projection takes about two minutes if you know the formula — and after reading this, you will.

The SIP Formula

The maturity value of a SIP is calculated using this formula:

M = P × {[(1 + i)^n – 1] / i} × (1 + i)

Here, M is the maturity value — what you end up with. P is your monthly SIP amount. i is the monthly interest rate — for a 12% annual expected return, i = 12 / 12 / 100 = 0.01. n is the total number of monthly installments — 15 years means n = 180. The formula treats each monthly installment as a separate investment that compounds for a different number of months, then sums them all. That last × (1 + i) accounts for the end-of-period compounding.

Worked Example: ₹5,000/Month at 12% for 15 Years

P = ₹5,000. Annual return = 12%. Monthly rate i = 0.01. n = 180.

Step 1: (1.01)^180 ≈ 5.9958.
Step 2: (5.9958 – 1) / 0.01 = 499.58.
Step 3: M = 5,000 × 499.58 × 1.01 = ≈ ₹25,22,782.

Total invested = ₹5,000 × 180 = ₹9,00,000. Returns from compounding = ₹25.2L – ₹9L = ₹16.2 lakh. Wealth multiple: 2.8x on your invested capital.

Rohit's relationship manager was projecting a much higher return rate — probably 15% or 18% — to get to ₹50 lakh. At 12%, the realistic answer is ₹25.2 lakh. Still excellent; just not twice as excellent as presented.

Here is how the outcome shifts across different return assumptions and time horizons for the same ₹5,000/month SIP:

Notice how dramatically outcomes diverge over 20 years. A 4-percentage-point difference in assumed return (8% vs 12%) produces a ₹20.4 lakh gap at the end.

What Most People Get Wrong

The "historical returns" printed in fund brochures are backward-looking by definition. A fund that delivered 18% CAGR between 2017 and 2021 was benefiting from a specific bull-market phase. Over the next 15 years, the same fund might return 9% — or 13%. Nobody knows. The compounding math in the SIP formula is perfectly reliable. The assumed return rate is not. Use 10% for conservative planning. Use 12% for moderate planning. Anything above 12% is optimism, not planning.

There is one more thing fund brochures never highlight: SIP investors actually benefit from market crashes. When the NAV drops, your fixed ₹5,000 buys more units. When markets recover, those extra units generate proportionally higher returns. Stopping a SIP during a crash — which many people do out of panic — converts a paper loss into a real one and eliminates the recovery upside. The investor who kept buying in 2020 at depressed NAVs outperformed the one who paused by a wide margin.

Frequently Asked Questions

What is the formula to calculate SIP returns?

M = P × {[(1 + i)^n – 1] / i} × (1 + i), where M is maturity value, P is monthly SIP amount, i is monthly interest rate (annual rate / 12 / 100), and n is number of months.

How much will ₹5,000 per month SIP give after 15 years at 12%?

₹5,000/month at 12% p.a. for 15 years grows to approximately ₹25.2 lakh. You invest ₹9 lakh in total; the remaining ₹16.2 lakh is returns from compounding.

What return can I realistically expect from SIP in India?

Historical 15-year CAGR for diversified equity mutual funds in India has been 11–13% p.a. For planning, 10–12% is a reasonable long-term assumption — not a guarantee.

Is SIP better than FD for long-term investment?

For 7+ year horizons, SIP in equity mutual funds has historically outperformed FDs significantly. ₹5,000/month for 15 years at 7% FD ≈ ₹15.8L vs ₹25.2L at 12% SIP. But SIP carries market risk; FD does not.

Should I stop my SIP when the market crashes?

No — a market crash is when SIP works best. Lower NAV means each ₹5,000 buys more units. When markets recover, those extra units generate higher returns. Stopping SIP in a crash locks in losses.

What return rate are you using in your SIP projections — and is it realistic for your investment horizon?