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Compound Growth

SIP Future Value

The future value of making regular equal deposits at fixed intervals with compound interest.

01 / Formula

Formula

FV = PMT × [((1 + r)^n − 1) ÷ r]

02 / Variables

Variables

FV: Future value
PMT: Regular payment amount
r: Periodic interest rate
n: Number of periods

03 / Worked Example

Worked Example

Scenario: Investing $500 monthly at 8% annual return for 20 years yields approximately $303,300.

Steps:

Monthly rate: 8% ÷ 12 = 0.667% = 0.00667
Number of periods: 20 × 12 = 240
Calculate (1.00667)^240 = 4.9268
Subtract 1: 4.9268 − 1 = 3.9268
Divide by rate: 3.9268 ÷ 0.00667 = 588.6
Multiply by payment: $500 × 588.6 = $294,300

04 / When to Use

When to Use This Formula

Plan regular investment portfolio
Calculate retirement savings from monthly contributions
Estimate long-term wealth building

05 / Limitations

Limitations & Assumptions

Assumes consistent return rate (unrealistic in volatile markets)
Assumes deposits at period end (not beginning)
Does not account for taxes or fees

06 / Questions

Common Questions

Is SIP better than lump-sum investing?

Neither is universally better. SIP reduces timing risk; lump-sum may give higher returns in rising markets. Context and market outlook matter.

Can I vary my SIP amount?

Yes, but the formula assumes constant amounts. Varying amounts requires recalculating for each change.

More on this topic

Compound growth and regular investing

Reference note: This is an educational mathematical reference. The formula's applicability depends on assumptions, market conditions, and use case. Always verify results independently and consult domain experts for decisions.