What is a Systematic Investment Plan (SIP)?

A Systematic Investment Plan (SIP) is when you invest a fixed amount in a mutual fund scheme at a regular interval, such as daily, weekly, every 15 days, monthly, or quarterly. SIPs run automatically. You choose the investment amount and frequency to set up the SIP, and create an e-Mandate (e-NACH) or UPI AutoPay to automate the investment flow.

SIPs are a go-to investment vehicle for most investors because:

  • They let you build an investment corpus bit-by-bit, with small but regular investments that also help build discipline. While each individual installment may be a small amount, they compound over time.
  • They allow for rupee-cost averaging. When you invest a large sum all at once and the market drops, the portfolio takes a long time to recover. SIPs spread small contributions over time, buffering your entry points during market swings.

SIP, lump sum, and Goal SIP — what is the difference?

The three serve different planning goals, so each requires different inputs.

  1. Consider two investors, Mohit and Arun. Mohit earns a monthly salary of ₹50,000 and keeps ₹10,000 aside. He invests that ₹10,000 in mutual funds every month through an SIP. With an SIP calculation, you enter what you invest each month, for how long, and an expected return. The calculator then tells you the final corpus you could build. You know the contribution, and you are solving for the end value.
  2. Arun has a large sum now but no recurring monthly income, so he invests it all today in one go. This one-time investment is a lump sum. A lump-sum calculation works the same way, except with a single upfront amount instead of periodic ones. You enter the amount, the duration, and the expected return, and it shows what that one investment could grow to.
  3. A Goal SIP calculation runs in reverse. Say you want ₹20 lakh for a car five years from now. Here you already know the target end value and the timeframe. Instead of solving for the final corpus, the calculator solves for the periodic installment, telling you how much to invest each month to reach ₹20 lakh.

So the difference comes down to what you know going in. With an SIP and a lump sum, you know what you are putting in and find out what you get. With a Goal SIP, you know what you want and find out what to put in.

How to use the Zerodha SIP calculator

The Zerodha SIP calculator estimates how much your investment returns in the future. Here is how you use it:

  • Adjust the frequency: The calculator sets it to monthly by default, but you can also set it to weekly, 15-day, quarterly, or yearly. SIPs do not have to be monthly—they only need to remain regular over time.
  • Set the SIP amount: Enter the number directly in the text box or toggle the slider to your desired investment amount per cycle.
  • Choose the investment duration: Set the period based on your target goal.
  • Enter an expected growth rate: Enter the annual rate of return you realistically expect your investment to grow at on average.

How is SIP return calculated?

The standard mathematical formula for calculating the future value of a monthly SIP is:

FV = P × ( [ 1 + r ] n − 1 r ) × ( 1 + r )

Where:

FV = Future value of your investment

P = Periodic investment amount per cycle (e.g., monthly contribution)

r = Periodic interest rate per installment period [ (Expected Annual Return / 100) / Number of installments per year ]

n = Total number of investment installments [ Years x Number of installments per year ]

(Note: If you choose daily, weekly, 15-day, quarterly, or yearly frequencies on the calculator, the variables r and n adjust based on the total number of installment periods per year.)

Example (Monthly SIP)

Say you want to invest Rs 5,000 every month for the next 40 years, with an expected annual return of 12%.

Here is a breakdown of the variables applied in the formula:

  • Monthly investment amount (P): Rs 5,000
  • Expected annual return (R): 12% per year
  • Periodic monthly return rate (r): 1% per month (12% divided by 12 months = 0.01)
  • Total investment duration in months (n): 480 months (40 years x 12 months)

Calculation Step-by-Step:

Future Value = P x [ ( (1 + r)^n - 1 ) / r ] x (1 + r)

Future Value = 5,000 x [ ( (1 + 0.01)^480 - 1 ) / 0.01 ] x (1 + 0.01)

Final Corpus Generated: Rs 5,94,12,101

Why your SIP calculator result does not match reality

An SIP calculator is a planning tool, not a guarantee. It assumes your money grows at a constant periodic compound rate each installment cycle, but real market returns fluctuate. When your investment period coincides with a bull market, your corpus may exceed expectations; during an extended market downturn, returns can drop lower or temporarily show a loss.

How to start an SIP on Zerodha Coin

You can set up an SIP in mutual funds on Coin (web or app) through these steps:

  1. Select the mutual fund scheme and choose the SIP option.
  2. Enter the initial investment amount and the installment amount.
  3. Select your investment frequency (daily, weekly, 15-day, monthly, or quarterly)
  4. To automatically scale your investment with growing income, enable Automatic step-up, enter the percentage increment, and select the step-up interval. Leave it disabled if you prefer fixed installments.
  5. Create the SIP and authorize the automated payment mandate (via e-Mandate or UPI AutoPay).