A Systematic Investment Plan (SIP) means investing a fixed amount on a regular schedule — usually monthly — rather than all at once. Because each installment is invested at a different time, the math behind the final maturity value is a bit more involved than simple compound interest, but it follows a well-defined formula.
The formula
M = P × [((1 + i)n − 1) / i] × (1 + i)
M is the maturity value, P is the amount invested each month, i is the monthly rate of return (annual rate ÷ 12 ÷ 100), and n is the total number of monthly installments.
Why the formula looks like that
Each individual monthly installment grows for a different length of time — the first payment compounds for nearly the whole period, while the last payment barely has time to grow at all. The formula is really just the sum of all of those differently-aged installments, each compounded for its own remaining time, written in a closed form rather than as a term-by-term sum.
A worked example
Investing 5,000 a month for 10 years at an assumed 12% annual return gives i = 0.01 and n = 120. The total amount invested over that time is a straightforward 5,000 × 120 = 600,000. The formula's maturity value comes out to roughly 1,161,700 — meaning the gains (561,700) actually end up larger than the total contributed, which is the effect of compounding across 10 years.
The assumption that does all the work
Every SIP projection hinges on the assumed rate of return, and that's an assumption, not a promise — actual market-linked returns vary year to year and are never guaranteed. A projection is most useful for comparing scenarios (a longer term vs. a higher monthly amount, for instance) rather than as a forecast of an exact number a decade out.
The SIP Calculator runs this formula live so you can see how changing the monthly amount, assumed return or time period shifts the total invested versus total gains.