SIP & Compound Interest Calculator

How to use

Choose SIP mode to project a recurring monthly investment, or Compound interest mode for a one-time lump sum. Enter your amount, an expected annual return, and the time horizon. The calculator shows the estimated future value, how much you contributed, and your estimated gains.

How compounding builds wealth

Compounding means your returns start earning returns of their own. A lump sum grows by FV = PV × (1 + r)ⁿ — each period multiplies the previous balance, so growth accelerates over time. The longer the horizon, the more dramatic the effect, which is why starting early matters more than starting big.

A SIP adds a new contribution every period, and each contribution compounds for however long it stays invested. The earliest contributions grow the most; the most recent barely grow at all. The future-value-of-a-series formula sums all of these:

FV = P × [ ((1 + r)ⁿ − 1) / r ] × (1 + r)

A note on the rate

When you enter an annualized expected return but invest monthly, dividing the annual rate by 12 slightly overstates growth. This calculator instead uses the effective monthly rate, (1 + annual)^(1/12) − 1, so that twelve months of compounding reproduce exactly the annual figure you entered. It's a small difference per month but adds up over long horizons.

Worked example

Invest 10,000 per month for 15 years at an expected 12% annual return. You contribute 1,800,000 in total. With monthly compounding at the effective rate, the projected value grows to roughly 4.7–4.8 million — meaning your contributions roughly triple, with the majority of the final value coming from compounded growth rather than the money you put in. That gap is the power of time in the market.

Lump sum or monthly — which ends up ahead?

Switch between the two modes and the answer is consistent: for the same total contributed, a lump sum wins, because every unit of money is invested for the full horizon rather than for an average of half of it. Take $120,000 at a 10% expected return over 10 years:

• All at once — $120,000 invested on day one grows to roughly $311,000.
• $1,000 a month for 10 years — the same $120,000 contributed, ending at roughly $201,000.

A $110,000 gap, purely from time in the market. Which is the argument for investing a windfall promptly rather than drip-feeding it — but it is not an argument that monthly investing is inferior, because the comparison is usually hypothetical. If you don't have $120,000 today, your real choice is $1,000 a month or nothing, and $201,000 beats nothing decisively.

The honest counterweight to lump-sum investing is sequence risk: putting everything in on a single date means one date's prices determine your entire entry point. Monthly contributions spread that across 120 different prices. The arithmetic favours the lump sum; whether you can hold it through a 30% drawdown in year two is a different question, and the model can't answer that one for you.

Where the money to invest comes from

The number worth putting into the field above isn't a share of your salary — it's a share of what survives tax. Work out your actual monthly take-home pay first, subtract what you genuinely spend, and use what's left. A projection built on a contribution you can't sustain for twenty years is worse than no projection, because the whole result depends on not stopping.

Where you hold it matters as much as the return. In the United States the usual tax-advantaged homes for regular investing are a pre-tax 401(k) or traditional IRA. This calculator projects growth before any tax, so inside one of those the result is closer to what you keep; in an ordinary taxable account, tax on gains and income will take a share of it.

Tips and common mistakes

• Be realistic about returns. Long-run equity returns are uncertain. Model a conservative rate as well as an optimistic one to see the range.
• Don't ignore inflation. A future value looks big, but inflation erodes purchasing power. Consider what the amount is worth in today's money.
• Time beats amount. Starting a smaller SIP earlier often beats a larger one started later, because early contributions compound the longest.
• Compare it against paying down debt. Investing at an expected 7% while carrying debt at 9% loses money with extra steps. Before committing a monthly amount here, price the alternative — the interest a loan overpayment saves is a guaranteed return, which an expected 10% is not.
• This is an estimate. Real returns vary and can be negative in any given year. Use the projection to plan, not to predict.