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SIP Compound Interest Formula:
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SIP (Systematic Investment Plan) compound interest calculates the future value of regular investments where each contribution earns compound interest over time. This is commonly used for rupee-based investment planning in mutual funds and other financial instruments.
The calculator uses the SIP compound interest formula:
Where:
Explanation: The formula calculates the accumulated value of regular investments where each installment compounds at the specified rate over the investment period.
Details: Accurate SIP calculation helps investors plan their financial future, understand the power of compounding, and make informed investment decisions for long-term wealth creation in rupees.
Tips: Enter periodic investment in rupees, periodic interest rate as a decimal (e.g., 0.01 for 1%), and number of periods. All values must be positive numbers.
Q1: What is the difference between SIP and lump sum investment?
A: SIP involves regular periodic investments, while lump sum is a one-time investment. SIP helps in rupee cost averaging and disciplined investing.
Q2: How often should the periodic rate be calculated?
A: The periodic rate should match the investment frequency. For monthly SIP, use monthly rate; for quarterly, use quarterly rate, etc.
Q3: Does this calculator account for inflation?
A: No, this calculates nominal returns. For real returns, adjust the interest rate for inflation.
Q4: Are there tax implications on SIP returns?
A: Yes, returns from SIP investments may be subject to capital gains tax depending on the investment type and holding period.
Q5: Can this formula be used for different currencies?
A: While designed for rupees, the formula works for any currency as long as consistent currency units are used throughout.