Compute the maturity value, total invested principal, and investment gains of a monthly SIP at a fixed annual return with monthly compounding — ideal for building wealth through regular monthly investing.
Input Data
Results
At a glance:A SIP compounds a fixed monthly contribution at a monthly rate; the maturity value combines all contributions and the accumulated gains.
Formula
monthlyRate = annualReturnPct% / 12
futureValue = monthlyInvestment × ((1+monthlyRate)^(years×12) − 1) / monthlyRate
totalInvested = monthlyInvestment × years × 12
gain = futureValue − totalInvested
$$i = \dfrac{r}{12}, \quad n = 12t$$$$FV = PMT \cdot \dfrac{(1+i)^{n}-1}{i} \cdot (1+i)$$$$Gain = FV - PMT \cdot n$$How to Use
- Enter the monthly investment and expected return.
- Enter the number of years.
- Review the maturity value, principal, and gains.
FAQ
What is a SIP (systematic investment plan) and how is it different from lump-sum investing?
A SIP (also called dollar-cost averaging or regular monthly investing) splits your capital and invests a fixed amount at regular intervals (usually monthly) into a fund or ETF. Unlike lump-sum, which deploys the whole sum at once, a SIP enters in batches. Its advantages: low barrier to start; dollar-cost averaging spreads timing risk (buy fewer units high, more low); and it builds discipline, overcoming emotional, ad-hoc investing. The trade-off: in a steadily rising market, lumpsum may edge ahead because all capital compounds from day one. This calculator shows the SIP compounding result; compare with the lump-sum and combined calculators.
How are the maturity value, total invested and gains computed — why is the gain larger than expected?
Total invested = monthly amount × total months (years × 12); it is the cash you put in. Maturity value uses the beginning-of-month annuity formula with monthly compounding. The gain = maturity value − total invested. The gain can approach the principal because of compounding (returns earning returns) and the time spread (the first month's contribution compounds 120 months, the last only one). So the result is not simply 'principal × return × years' — each contribution compounds over its own period, which this calculator handles precisely.
What should I watch — is the maturity value guaranteed?
This calculator assumes a fixed return with stable monthly compounding to show the power of compounding and discipline, but note the limits. First and foremost, the maturity value is NOT guaranteed — real returns fluctuate and can even be negative; this single fixed rate is a simplification. SIP results are also sensitive to the sequence of returns (a late crash can shrink the final value), which the model cannot show. Second, the return assumption is highly sensitive — an optimistic rate hugely inflates the long-term value; use a conservative rate and remember higher expected return usually means higher risk. Third, inflation erodes purchasing power. Fourth, fees and taxes are not included — fund fees compound into a sizable drag over time. Fifth, this assumes a fixed beginning-of-month amount; stepping up the monthly amount raises the result. Use it for understanding the mechanism and long-term planning, not as a return promise. Investing involves risk; consult a licensed professional if needed.
SIP vs lump-sum — which returns better, and which should I choose?
It depends on market, your capital and temperament; neither is an absolute winner. Pure math: if the market rises long term, lump-sum's expected return usually edges ahead because all capital compounds from day one, while a SIP's later contributions compound for less time. Studies often show lump-sum winning in backtests. But reality has key considerations math ignores. First, most people do not have a lump sum — salaried savers can only invest in batches, so SIP is the only feasible way, better than not investing. Second, timing risk and regret — lump-sum risks buying the top and panic-selling; SIP spreads entry and reduces that risk and stress. Third, behaviour and discipline — automated SIP overcomes human weaknesses and keeps you invested, which often matters more than optimising return. How to choose: (1) if you already have a lump sum and can stomach volatility, lump-sum has higher expected return but be ready for buying high (or split over a few months); (2) if you invest from monthly cash flow, fear timing, or are emotional, SIP suits you, trading a little return for peace and lower timing risk; (3) a compromise — invest part lump-sum plus part SIP, using our lump-sum-plus-SIP calculator. The best strategy is the one you can stick with long term. Returns are not guaranteed; this tool is for estimation only, not investment advice.
Why does the SIP maturity value differ so much from my mental 'principal × return × years' estimate?
Because the common mental estimate uses a wrong simplification, ignoring compounding and the time spread. The wrong version treats all money as invested on day one and multiplied by total return (a lump-sum single-interest style), which does not fit a SIP. The correct logic: money is invested month by month, and each batch compounds on its own. Two effects are missed: compounding (not simple interest), and the time spread (each batch compounds for a different period). The correct formula is the monthly-compounding annuity formula. With numbers: HK$5,000/month, 12%, 10 years — wrongly you might guess ~HK$1.32m, but correctly total invested is HK$600k and maturity ~HK$1.16m, gain ~HK$561k, near double the principal, mainly from compounding and early contributions' long roll. Reminders: (1) this is a fixed-return theoretical value, real returns fluctuate; (2) highly sensitive to the rate assumption — 8% vs 12% shrinks the long-term value a lot, use conservative numbers; (3) inflation, tax and fees are not included. Understanding compounding and the time spread explains why 'start early, persist longer' matters so much for SIPs.
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.