Compound Interest Calculator

A worked example: Sandeep's ₹15,000 SIP

Sandeep is 27, works in Hyderabad, and just got his first appraisal cycle behind him. He starts a ₹15,000 SIP in a Nifty index fund through Groww, no lumpsum to begin with, nothing already invested. He sets the calculator to 12% annual return, 20-year tenure, and a 10% yearly step-up because he expects his salary to grow roughly in line with that.

Run the numbers by hand for a sanity check on year one alone: ₹15,000 invested every month for 12 months, each instalment compounding monthly at 12% (1% a month) for the months remaining in the year. The first instalment compounds for eleven months, the last for zero. Add all twelve up and you get a bit over ₹1,90,000 by the end of year one, against ₹1,80,000 actually paid in. That gap, roughly ₹10,000 in year one, is compounding doing very little work yet. It looks unimpressive. It is unimpressive, in year one.

The step-up changes the shape of things faster than people expect. Year two's SIP becomes ₹16,500, year three's ₹18,150, and by year ten Sandeep is investing over ₹35,000 a month without ever feeling a single lump-sum jump, because each step is only 10% on top of the last. Over the full 20 years, the calculator's year-wise table will show his total contribution and his total corpus diverging further each year, slowly at first, then a lot faster after around year twelve or thirteen, once the base has grown large enough for 12% of it to be a serious rupee amount.

What the wealth ratio tells you, and what it hides

A wealth ratio of 4x sounds like a strong result and it is one, in nominal terms. But it says nothing about inflation. If Sandeep's corpus is 4x his contributions after 20 years, and inflation over that period has run at 6%, a chunk of that 4x is just prices rising, not real wealth. The calculator on this page reports nominal growth, the same way your mutual fund statement does. It doesn't automatically discount for inflation, that's a separate mental step you have to do yourself, or check on the FIRE Number calculator, which works in today's rupees throughout.

The wealth ratio also treats every rupee as arriving on schedule. Miss a few SIP instalments during a job change or a lean month and your actual ratio at year 20 will be lower than the projection, even if your monthly amount stays the same afterward, because the missed months never got their eleven or eighteen or twenty years to compound.

Where people go wrong with this calculator

The single biggest one is picking a return rate from a recent screenshot. Someone sees their portfolio was up 22% last year and types 22% into the return field. A calculator projecting 20 years at a rate that's only ever been sustained for one good year will hand back a number with no relationship to reality.

Second, people forget that a step-up compounds on itself too. A ₹10,000 SIP with 12% step-up isn't adding ₹1,200 a year forever, it's adding 12% of whatever last year's instalment was, which grows the increments themselves over time. Confusing this with a flat rupee increase understates how much cash flow the plan actually needs by year fifteen.

Third, entering a tenure that doesn't match your real investment horizon. People often run the calculator for 30 years because that sounds impressive, when the money is actually earmarked for a goal, a house down payment, a child's college fee, that lands in year eight. Match the tenure to the actual goal, not to whatever produces the biggest final number.

The limits of this model

This is a fixed-rate compounding model. It does not simulate the up-and-down path equity markets actually take, only the smoothed average of it. Two investors who end up at the same 12% CAGR over 20 years can have wildly different experiences along the way, and if one of them panics and stops their SIP during a 2020-style drawdown, their real result diverges from this projection permanently, not temporarily.

It also doesn't account for expense ratios, exit loads, or taxation on redemption. A direct plan index fund with a 0.2% expense ratio behaves close to what's shown here; a regular plan with a 1.5% expense ratio, or an actively managed fund that underperforms its benchmark, will land well short of the number this page shows you, even at the same headline return assumption. Treat the output as an upper bound on what a clean, low-cost, undisturbed SIP can do, not a promise.