How SIP Returns Are Calculated: Contributions, Timing and Projected Growth

A SIP projection has three parts

A SIP projection starts with every scheduled contribution, gives each contribution a growth period and adds the resulting values together. The output separates total invested from projected growth; their sum is the projected future value.

Total invested follows from the contribution schedule. Projected growth depends on the assumed return and the model's timing convention, so it is not an earned result or a promise of return.

Why every monthly contribution grows for a different period

A monthly SIP is a series of contributions, not one amount invested on the first day. The earliest contribution remains in the projection for almost the full duration. Each later contribution has one month less, and the final contribution has the shortest growth period.

That difference in time is why multiplying the total contributions by one ten-year growth factor would be wrong. The model grows each monthly amount for the time available to it and then combines the results.

The contribution and return convention used here

ArthaSiddhi models each contribution at the beginning of the month. A contribution therefore receives that month's modelled growth before the next contribution is added.

The entered annual percentage is divided by 12 and by 100 to produce the monthly rate used by the projection. At 12% a year, the periodic convention is 1% a month. This is a modelling conversion, not a claim that a market investment earns 1% in every month.

Worked example: ₹5,000 a month for 10 years

Suppose ₹5,000 is contributed at the beginning of every month for 10 years and the projection uses a constant 12% annual return, converted to 1% a month. There are 120 contributions under these assumptions.

What the worked result means

The ₹6,00,000 is defined by ₹5,000 multiplied by 120 monthly contributions. The other ₹5,61,695 is projected growth produced by applying the smooth-return convention to contributions made at different times.

The projected future value of ₹11,61,695 is the sum of those two parts. It does not mean every contribution earns the same rupee gain: the early contributions account for more projected growth because they remain in the model for longer.

What changes when one input moves

The projection-assumptions guide shows why changing only the assumed return can produce materially different values even though the contribution schedule is identical.

• Monthly amount: a larger contribution raises both total invested and the capital available for projected growth.
• Duration: more months add more contributions and give the earlier contributions more time in the model.
• Assumed return: total invested stays unchanged, but projected growth and future value move.