Explained: Want to estimate how much your Rs 10,000 monthly SIP will be worth? Use this formula

Many mutual fund investors often make monthly investments through Systematic Investment Plans (SIPs) mode after adjusting their monthly expenses and setting aside emergency funds. Suppose, an individual invests Rs 10,000 every month for a period of say five years, they want to know the future value of their investments at the end of their investment period.

To estimate the future value of your monthly investments, investors can use this specific formula:

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Future Value (FV) = P [ (1+i)^n - 1 ] * (1+i)/i.

Formula:

- FV is the future value or the maturity amount.

- P is the monthly investment amount.

- i is the compounded rate of return.

- n is the investment period in months.

Here is how this formula works in different scenarios:

1. Suppose an investor invests Rs 10,000 monthly into a mutual fund scheme with an expected annual return of 10% over 10 years. The expected future value of their investment will be Rs 20.48 lakh.

2. If the expected annual rate of return increases to 12%, the future value will rise to Rs 23 lakh over the same period.

3. With a 15% expected annual return, the future value of the monthly Rs 10,000 investment over 10 years will be Rs 27.52 lakh.

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These calculations show how the rate of return can significantly impact the future value of your monthly SIP investments. The formula helps investors to get a rough idea of how their investments might grow over time.

Future value of an investment refers to the worth of that investment or asset at a future date, considering a specific rate of return. In simple terms, it's the amount your current investment will grow into over time, assuming a given interest rate. Both investors and financial planners use future value to estimate how much an investment made today will be worth in the future.