Regional Finance · 6 min read · Last updated September 2026
Where P is the monthly amount, i the monthly rate (annual ÷ 12) and n the number of months. Worked example: P = 5,000, i = 0.01 (12%/12), n = 60. (1.01⁶⁰ − 1) ÷ 0.01 = 81.670; × 1.01 = 82.486; × 5,000 = ₹4,12,432. Invested principal: 5,000 × 60 = ₹3,00,000 — so ₹1,12,432 is growth.
| Duration | Invested | Value @12% | Growth |
|---|---|---|---|
| 5 years | ₹3,00,000 | ₹4,12,432 | ₹1,12,432 |
| 10 years | ₹6,00,000 | ₹11,61,695 | ₹5,61,695 |
Doubling the time invested 2× the money but produced 5× the growth. Compounding is back-loaded: the final years contribute most of the gain, which is why interrupting a SIP at year 7 costs far more than the 7 years of deposits suggest.
The 12% figure is an assumed constant annual return — real equity funds deliver it as a volatile path (−35% years happen), and the formula's smooth curve is a simplification, not a promise. Inflation also shrinks real value: ₹11.6 lakh in 10 years buys roughly what ₹6–7 lakh buys today at 5–6% inflation. Run your own numbers in the SIP Calculator; the Step-up SIP version models the annual increase most salaried investors actually do.
As the future value of a monthly annuity: FV = P × [(1+i)ⁿ − 1] ÷ i × (1+i), with i as the monthly rate. ₹5,000/month at 12% for 5 years ≈ ₹4,12,432 against ₹3,00,000 invested.
At a constant 12% annual return: about ₹11,61,695 against ₹6,00,000 invested. The real figure depends on actual market returns, which arrive as a volatile path rather than a smooth 12%.
No. It is a planning assumption based on long-run equity history. Treat outputs as illustrations, and judge a SIP on 7–10+ year horizons where volatility averages out more.
One where the monthly amount rises each year, typically with your salary. Because later deposits are larger, step-up SIPs end substantially higher than flat SIPs at the same duration.